Oil market slides as US crude reserves jump

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World oil prices sank on Wednesday in response to a stronger-than-expected increase in stockpiles in the United States, which is the world's biggest crude-consuming nation.

New York's main contract, light sweet crude for delivery in June, shed $1.56 cents to $109.49 a barrel, sliding underneath $110 for the first time since April 20.

Brent North Sea crude for June dived $1.04 to $121.41 per barrel in late afternoon London deals.

The US government's Department of Energy (DoE) announced on Wednesday that American crude inventories leapt 3.4 million barrels in the week to April 29.

That eclipsed market expectations of a smaller gain of two million barrels, according to analysts polled by Dow Jones Newswires, and followed a huge jump of 6.2 million barrels in the previous week.

An increase in US stockpiles indicates softer energy demand in the world's largest oil consuming nation.

"The market's initial reaction was bearish, although it was already on sell-mode anyway," said VTB Capital analyst Andrey Kryuchenkov.

But the DoE added that gasoline or petrol reserves slid by one million barrels last week. That confounded forecasts for a slender gain of 100,000 barrels.

Oil had also plunged on Tuesday as traders fretted about the eurozone debt crisis and slower economic growth in crude importers, and mulled the impact of the death of Al-Qaeda chief Osama bin Laden on global political risk.

"Prices retreated sharply on Tuesday, as uncertain economic conditions regarding (the) eurozone's sovereign debt issues dominated the markets and weighed on crude oil prices," said Sucden analyst Myrto Sokou.

"In addition, investors remained cautious, trying to digest the news of Osama bin Laden's death and any potential effects on the direction of the oil market."

Prices had fluctuated wildly following news of the demise of Saudi-born terror leader bin Laden, who was killed on Monday in a raid by US special forces deep inside Pakistan.

There was more signs that slower economic growth in big oil importers like China and the United States could dampen demand.

Investors also monitored political unrest in the oil-producing Arab world and its impact on crude supplies.

Libyan leader Moamer Kadhafi's forces pounded the lifeline port of Misrata with deadly fire on Wednesday, as the International Criminal Court said his regime was still carrying out crimes against humanity.

A rebel spokesman said at least five people were killed as loyalists shelled Misrata port, from which an International Organisation of Migration ship managed to evacuate about 800 people, including stranded migrants and wounded.

Libya, a key crude-exporting nation that was producing some 1.7 million barrels a day before an uprising against Kadhafi broke out in mid-February, has seen its output slashed since the revolt began.

© 2011 AFP

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