Oil prices give gains on US inflation worries

Oil prices fell in early Asian trade on Friday as U.S. inflation data further dimmed the prospect of an immediate interest rate cut and strengthened the dollar, weighing on oil demand.

Brent futures were down 75 cents, or 0.84%, at $88.75 a barrel, while West Texas Intermediate (WTI) futures were down 65 cents, or 0.78%, at $83.20 a barrel by 1221 GMT.

“Stubborn U.S. inflation is fueling concerns that interest rates may rise in the long term,” leading to a stronger U.S. dollar and pressure on commodity prices, said Independent Markets analyst Tina Deng.

U.S. inflation rose 2.7% in the 12 months to March, data showed on Friday, ahead of the Federal Reserve's 2% target. Lower inflation would have increased the likelihood of interest rate cuts, which would have stimulated economic growth and oil demand.

The dollar strengthened on the prospect of higher and longer interest rates. A strong dollar makes oil more expensive for holders of other currencies.

However, Deng said oil prices could rise again if US inventory data and China's purchasing managers' index show improvements this week.

Brent rose 49 cents and WTI 28 cents on Friday amid concerns about supply disruptions due to events in the Middle East.

Markets shrugged off potential supply disruptions from Ukrainian drone strikes on the Ilski and Slavyansk oil refineries in Russia's Krasnodar region over the weekend. The Slavyansk refinery had to suspend some operations after the attack, a senior executive said. (Reporting by Colin Howe; Editing by Sonali Paul)