Oil prices drop ahead of US energy report

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World oil prices fell on Wednesday as investors awaited the latest update on energy reserves in key consumer the United States, and kept an eye on unrest in crude exporter Libya.

In London afternoon trade, Brent North Sea crude for delivery in May shed 44 cents to $114.72 a barrel.

New York's main contract, light sweet crude for May, lost 49 cents to $104.30.

The US government's Department of Energy (DoE) will publish its regular snapshot of American crude oil inventories at 1430 GMT.

"Due to Japan and Libya, the DoE report has been ignored as a trading input over the last few weeks as market participants were focusing on the macro-developments," said analyst Olivier Jakob at consultancy PetroMatrix.

"Now that those events are not anymore attracting any trading volume we would expect that traders will start watching the DOE report again."

Crude stockpiles are expected to jump by 1.5 million barrels in the week ending March 25, according to analysts polled by Dow Jones Newswires.

Gasoline or petrol reserves, meanwhile, are seen sliding by 1.7 million barrels.

Traders are keenly following the level of gasoline reserves ahead of the summer driving season in the United States starting in May, when many Americans hit the roads on holiday, pushing up demand.

In Libya on Wednesday, loyalist forces overran the oil town of Ras Lanuf, scattering outgunned rebels as world powers debated arming the rag-tag band of fighters seeking to oust Moamer Kadhafi.

AFP reporters quoting rebel fighters said Kadhafi's troops swept through Ras Lanuf, strategic for its oil refinery, blazing away with tanks and heavy artillery fire soon after dawn.

Panicked rebels fled in their hundreds through Uqayla, 20 kilometres (12 miles) east of Ras Lanuf, calling for coalition air strikes on Kadhafi's forces.

Libya produced 1.69 million barrels a day before the unrest, according to the International Energy Agency. However, output has since fallen sharply.

On Tuesday, the oil market had risen, ending three days of losses, as traders reacted to news that Kadhafi loyalists were winning back ground.

"Oil prices rose yesterday as forces loyal to Kadhafi moved eastwards to reoccupy coastal towns in the strategically important oil-exporting region," added Westhouse analyst Trish Hart.

Across in Japan, meanwhile, crews continued their struggle to avoid a meltdown at the crippled Fukushima Daiichi plant that was rocked by a devastating earthquake and tsunami on March 11.

© 2011 AFP

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