Oil slides under $99 on surprise bounce in US crude reserves

2nd June 2011, Comments 0 comments

World oil prices sank further on Thursday, erasing earlier gains, as traders digested news of a surprise jump in crude inventories in top consuming nation the United States.

New York's main contract, light sweet crude for delivery in July, fell $1.41 to $98.88 per barrel.

Brent North Sea crude for July shed 35 cents to $114.18 a barrel in afternoon deals.

The US Department of Energy (DoE) revealed Thursday that American crude reserves soared by 2.9 million barrels in the week ending May 27, indicating weaker energy demand.

That surprised the market because expectations had been for a drop of 1.2 million barrels, according to analysts polled by Dow Jones Newswires.

Separately, industry group the American Petroleum Institute also announced that US crude reserves has swelled by 3.5 million barrels last week.

Both weekly reports were published later than normal because of a US public holiday on Monday.

Crude futures had fallen sharply on Wednesday, weighed down by weak economic data that has sparked serious concern about the energy demand outlook.

Markets were rattled by grim jobs and manufacturing figures that revealed deep weaknesses in the US economy.

Payrolls firm ADP reported the US private sector added 38,000 jobs in May, well below the consensus estimate for 170,000. The April figure was revised upward to 177,000.

Meanwhile the Institute of Supply Management manufacturing survey showed a slowdown in business in May.

The ISM index dropped nearly seven percentage points from April, to 53.5 percent. New orders alone dropped by almost a fifth.

Wall Street was hit again on Thursday by news that Goldman Sachs had received a subpoena from prosecutors probing the financial crisis and a Moody's warning that credit ratings at other banks could be downgraded.

Oil traders were meanwhile looking ahead to the June 8 output meeting of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna.

Prices have been weighed down by speculation that the cartel could decide to lift output next week to compensate for Libyan oil production, which has been ravaged by unrest.

Libyan Oil Minister Shukri Ghanem announced Wednesday in Italy that he had resigned and left Libya to join the uprising against Moamer Kadhafi "to fight for a democratic country."

Ghanem, the head of the state-run National Oil Corporation (NOC), who has been Libya's representative at at the OPEC oil cartel for years, said his country was "moving towards a total block on oil production."

"Only very little is being produced for security reasons, because it's not possible to export it, because of the UN embargo and the fact that the foreigners have all left," he said.

Oil-rich Libya was producing 1.69 million barrels a day before the unrest but this has long since ground almost to a halt.


© 2011 AFP

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