Oil prices drop before US inventories report
World oil prices slid Wednesday as the market awaited a weekly snapshot of crude inventories in top consumer the United States.
New York's main contract, light sweet crude for delivery in July, fell 36 cents to $99.01 a barrel.
Brent North Sea crude for July lost $1.31 to $118.85 a barrel in London afternoon deals. Losses were exaggerated by profit-taking on the contract's last trading day.
The US Department of Energy will at 1430 GMT announce the level of energy inventories in the United States, the world's biggest consumer of crude oil.
"The main focus today will be switched to the weekly oil inventories report for a confirmation of a large decline in crude oil stocks that could provide optimistic signs for a potential increase in the US oil demand," said Myrto Sokou, an analyst at brokers Sucden Financial.
On Tuesday, the private organisation the American Petroleum Institute forecast a three-million-barrel decrease in crude oil inventories for the week ending June 10, double initial predictions and a sign that demand was picking up.
Oil prices had rallied on Tuesday in nervous trade, with New York crude closing up two dollars as the market welcomed encouraging US economic data.
The gap between New York and Brent crude prices meanwhile struck a record high on Tuesday. Brent hit a record premium of $22.79 against the price of New York crude, with the latter weighed down by high US inventories according to analysts.
John Kilduff of Again Capital had suggested that Tuesday's rises had been a technical rebound after two down days.
Goldman Sachs meanwhile warned in a market analysis that the bigger picture is rising demand forcing a tightening of supply.
"With world economic growth continuing to drive oil demand growth well in excess of non-OPEC production growth, the oil market continues to draw on inventories and OPEC spare capacity in order to balance," Goldman analysts said.
"In our view, it is only a matter of time until inventories and OPEC spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supplies," they added.
Official data this week showed industrial output from China, the world's largest energy consumer, rose sharply in May.
Sustained growth in the Chinese industrial sector would translate to strong crude demand as the Asian economic powerhouse seeks energy to fuel its thousands of workshops and factories.
© 2011 AFP