Oil price plummets under 76 dollars per barrel

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World oil prices plunged under 76 dollars on Wednesday on the back of rising crude stockpiles and yet another batch of disappointing economic data in the United States, the world's top energy consumer.

The market remained jittery ahead of a US interest rate decision and after an upbeat energy demand outlook from the International Energy Agency.

New York's main futures contract, light sweet crude for delivery in August, dived 2.03 dollars to 75.82 dollars a barrel.

Brent North Sea crude for August delivery tumbled 1.92 dollars to 76.12 dollars per barrel in late afternoon deals.

The US government's Department of Energy (DoE) said Wednesday that American crude reserves soared by 2.0 million barrels in the week to June 18, indicating weaker demand for energy.

That surprised the market because expectations had been for a large drop of 1.0 million barrels, according to analysts polled by Dow Jones Newswires.

Gasoline or petrol stockpiles fell by 800,000 barrels, which confounded a forecast of a 300,000-barrel gain.

"We had another mixed report since supportive product numbers were overshadows by increasing crude stockpiles," said VTB Capital analyst Andrey Kryuchenkov.

"We still expect improving gasoline numbers from here and into the third quarter, with the US summer driving season in its full swing and with the seasonal trend intact."

The weekly snapshot is a key market indicator of demand because the United States consumes far more oil than any other country.

In addition, official US data showed Wednesday that sales of new one-family homes in the United States plunged almost 33 percent in May to a record low after the expiration of a tax break.

The Commerce Department said sales of new single-family homes were at a seasonally adjusted annual rate of 300,000 in May, 32.7 percent below the revised April rate of 446,000.

The pace was the slowest since January 1963, when the department began the data series, and well below the average analyst forecast of 430,000.

The pullback in new-home sales was expected after buyers rushed to meet an April 30 deadline for contracts to be signed, driving up April sales.

Kryuchenkov described the data as "disappointing" and said it helped keep a lid on the oil market.

He also noted that "a stronger dollar added pressure to most commodity markets today."

Oil had also fallen on Tuesday as poor US existing home sales numbers erased a brief surge of market optimism over China's recent move to make its currency more flexible.

Later Wednesday, the US Federal Reserve was expected to keep US interest rates at historic lows, as it tries to keep a languishing recovery on track.

Elsewhere on Wednesday, the Paris-based IEA -- the oil policy arm of the Organisation for Economic Cooperation and Development -- said in a report that oil demand will be spearheaded by emerging nations.

"The IEA report said ... increasing global oil supplies will possibly offset higher oil demand over the next five years, but the agency raised the global oil demand growth outlook to an average 1.4 percent for every year to 2015, citing potentially robust demand from the emerging markets," said Sucden analyst Myrto Sokou.

"The IEA said that global oil supply will increase to reach 96.5 million bpd (barrels per day) by 2015, mainly led by non-OPEC countries."


© 2010 AFP

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