petroleumworld

Oil prices slipped Wednesday amid an unexpected surge in crude reserves in the United States, indicating weaker demand in the key energy-consuming nation.

New York's main contract, light sweet crude for delivery in September, sank 1.02 dollars to close at 76.56 dollars a barrel.

London's Brent North Sea crude for September dropped 85 cents, settling at 75.37 dollars.

The market was shocked by the latest data Wednesday from the US Department of Energy showing American crude oil reserves rising 400,000 barrels in the week ending July 16.

The market had expected a large drop of 1.3 million barrels, according to analysts polled by Dow Jones Newswires.

The department also said gasoline inventories grew by 1.1 million barrels last week, well above the 700,000-barrel increase forecast by analysts.

Stocks of distillates, which include diesel and heating fuel, added 3.9 million barrels, more than double the expectated gain of 1.6 million barrels.

"The inventories for the fourth week in a row on gasoline built -- obviously that is bearish, as is the substantial build in distillates inventories," said analyst Andy Lipow of Lipow Oil Associates.

"In addition, the market was expecting another draw in crude," he said.

Torbjorn Kjus, analyst at DnB NOR Markets, described the latest US inventory report as "bearish."

Worries about the US economic recovery are also affecting markets even as second-quarter earnings of companies have mostly lived up to expectations.

Federal Reserve chairman Ben Bernanke warned Wednesday that the outlook for the world's largest economy remained "unusually uncertain" but said the central bank could step in to bolster the recovery.

In Senate testimony, Bernanke said the economy would see only "moderate growth, a gradual decline in the unemployment rate, and subdued inflation over the next several years."

Mike Fitzpatrick, vice president of MF Global, said that US quarterly earnings reports so far have been surprisingly positive, underpinning the oil market.

"Earnings reported by US corporations are unexpectedly good, in contrast to macroeconomic data, positively effecting crude oil and refined products prices, seemingly affirming equity valuations and shifting sentiment back to belief in a viable sustainable recovery," he said.

Story from AFP
AFP 07/21/2010 21:03

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