Oil prices drop before US energy report

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World oil prices dipped on Wednesday on profit-taking as traders awaited a crucial weekly snapshot of crude stockpiles in top energy consumer the United States.

New York's main contract, light sweet crude for delivery in August, declined 44 cents to 76.71 dollars a barrel.

Brent North Sea crude for August eased 32 cents to 76.33 dollars in midday London trade.

Later on Wednesday, the US government's Department of Energy (DoE) will release its report on American crude inventories for the week ending July 9.

Crude stocks are forecast to drop by 1.2 million barrels, according to analysts polled by Dow Jones Newswires. Gasoline or petrol stockpiles are expected to be flat.

"The pullback (in prices) is not really very significant," said Victor Shum, senior principal of Purvin and Gertz energy consultants in Singapore.

"I would attribute this fall to some profit-taking, while the equities markets continue to provide strong support for oil."

Oil had soared in value on Tuesday, as the dollar weakened and the International Energy Agency (IEA) forecast that demand for the commodity was projected to increase slightly this year.

"In its latest monthly report, the IEA increased its outlook for 2010 oil demand growth slightly to 1.77 million barrels per day," said analysts at the JBC Energy consultancy in Vienna.

"Given the ongoing discussions of a double-dip recession and the absence of a clear sign of the sustainable recovery of the global economy, the figure seems fairly optimistic.

"Furthermore, the IEA sees demand growth in 2011 slowing down to 1.3 million barrels per day, indicating that the vast majority of the economic uptick will take place in 2010."

Meanwhile, positive US company results have sparked hope of rising energy demand from the world's biggest economy.

"It seems that the strong corporate earnings results from Alcoa and Intel boosted investor sentiment... showing encouraging signs for the US economic recovery," noted analysts at the Sucden brokerage in London.

"Investors are looking for a more optimistic tone in the US corporate earnings in the second quarter that could increase the global oil demand in the second half of 2010."

This week, Alcoa reported a swing into profit and raised its forecast for global demand, while Intel posted quarterly profits of 2.9 billion dollars, the best result in the firm's 42-year history.

JPMorgan Chase kicks off the US financial sector's earnings season on Thursday, followed by Bank of America and Citigroup on Friday.

© 2010 AFP

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