Futures in New York held below US$59 a barrel, heading for a monthly loss.

The American Petroleum Institute said that US crude inventories fell by 5.27 million barrels last week, suggesting that more comprehensive government data due Thursday may show a larger decline than the 1.36 million-barrel drop expected by analysts.

Oil is headed for its first monthly loss this year after a shattering of the trade truce between the US and China threw the global growth outlook into question.

Volatility has risen as traders are torn between trade-war headlines and fears that tensions between America and Iran may lead to conflict in the oil-rich Persian Gulf.

West Texas Intermediate crude for July delivery was down 3 cents at US$58.78 a barrel on the New York Mercantile Exchange as of 8.02am local time, after slipping 0.6% on Wednesday. The contract is down 8% so far this month.

Brent for July settlement fell 67 cents to US$68.78 a barrel on London’s ICE Futures Europe exchange, after closing down 0.9% on Wednesday. The global benchmark crude was trading at a premium of US$9.98 a barrel to WTI.

“In the oil market, there is some optimism after the inventory data confirmed that the supply glut isn’t building,” said Naeem Aslam, the London-based chief market analyst at ThinkMarkets.

“However, any upside move in the oil price is open to the threat which comes from the ongoing trade war. This situation is going to impact the demand enormously, regardless of the oil-inventory data.”

US crude inventories rose in four of the five weeks through May 17 and are at 476.8 million barrels, the highest since mid-2017, Energy Information Administration data show.