Oil prices settled lower Thursday, as concerns over supply outstripping demand persist a day after a surprise build in U.S. crude inventories, but losses were kept in check by signs of cooling U.S. inflation.

At 14:30 ET (18:30 GMT),  West Texas Intermediate crude futures fell 0.2% to $78.62 a barrel and theBrent oil futures fell 0.4% to $82.27 a barrel.

Weak PPI data keeps losses in check

Data released earlier Thursday showed that U.S. producer prices unexpectedly fell in May, with the producer price indexdropping 0.2% last month after advancing by an unrevised 0.5% in April.

In the 12 months through May, the PPI increased 2.2% after rising 2.3% in April.

This followed data, released on Wednesday, showing consumer prices unchanged in May for the first time in nearly two years.

The U.S. Federal Reservekept its benchmark overnight interest rate in the current 5.25%-5.50% range on Wednesday, with Fed officials cutting predictions of the number of cuts of 25 basis points likely this year to one, from three in March, citing sticky inflation.

A cut in interest rates would likely stimulate economic activity in the U.S., boosting demand for crude in the world's biggest consumer. 

Supply surplus concerns build amid worries about growing out  following surprise jump in US inventories 

Analysts at Citi warned that Brent oil prices could crash below $60 a barrel next year, pressured by a "substantial" supply surplus amid increased output in North America, Brazil and Guyana.

The bearish outlook comes a day after after U.S. government data showed on Wednesday showed that U.S. oil inventories unexpectedly grew in the first week of June - by 3.7 million barrels, against expectations for a draw of 1.2 million barrels.