Oil prices drop on profit-taking, Japan downgrade
World oil prices fell on Thursday as traders took profits after a brief surge and surprise ratings downgrade for Japan, analysts said.
London's Brent North Sea crude for March delivery slid 33 cents to $97.58 a barrel in late morning deals.
New York's main contract, light sweet crude for delivery in March, retreated 93 cents to $86.40 a barrel, after rising sharply the previous day.
VTB Capital analyst Andrey Kryuchenkov said that traders were "taking profits," adding that sentiment was also hampered by Japan's ratings downgrade.
Standard & Poor's on Thursday cut Japan's credit rating for the first time since 2002, accusing the government of lacking a "coherent strategy" in efforts to ease the highest debt of any industrialised nation.
The US credit risk appraiser cut its rating on Japan's long-term sovereign debt to "AA minus" from "AA", saying it expected the country's groaning fiscal deficits to stay high in coming years.
Crude futures had rebounded on Wednesday, following six straight drops, after the US Federal Reserve announced that it would keep interest rates low and continue bond purchases to help the economic recovery.
However, the oil market hit reverse gear on Thursday as investors also reassessed data showing weak energy demand in the United States.
"The crude oil rally reversed course due to concerns on US oil inventories," said Victor Shum, senior principal at Purvin and Gertz international energy consultants in Singapore.
Data released by the US Department of Energy (DoE) Wednesday showed an unexpectedly sharp build in US crude inventories, indicating soft demand.
The DoE said inventories jumped 4.8 million barrels in the week ending January 21, compared to analyst expectations of 900,000 barrels.
Later on Thursday, at 1330 GMT, the oil market will digest key US weekly job claims data for the latest reading on the health of the American economy.
Developments in the US are closely watched by global investors because it is the world's biggest economy and the largest oil consuming nation.
© 2011 AFP