Oil prices slip on surprise crude stockpile jump

NEW YORK
Petroleumworld.com, Feb 04, 2010

Oil prices fell Wednesday after big gains earlier this week as the market reacted to a surprise jump in crude oil inventories rose in the United States, the world's biggest energy consumer.

New York's main futures contract, light sweet crude for delivery in March, dipped 25 cents to 76.98 dollars per barrel.

London's Brent North Sea crude for March fell 14 cents to 75.92 dollars.

Traders said the market was choppy, with prices rising initially after the US Department of Energy (DoE) reported Wednesday that gasoline or petrol reserves sank by 1.3 million barrels in the week ending January 29. That confounded market expectations for a gain of one million.

The DoE added that inventories of distillates -- including diesel and heating fuel -- fell 900,000 barrels. Analysts had pencilled in an 800,000-barrel decline.

Crude oil stockpiles meanwhile leapt by 2.3 million barrels. Market expectations had been for no change.

The DoE added Wednesday that US refiners cut back last week to operate at 77.8 percent of capacity.

That was the lowest rate in at least 20 years, outside the immediate aftermath of a hurricane.

"The crude build seems to be the factor most driving the market," said Jason Schenker, president of Prestige Economics.

"The draw in gasoline was surprisingly large, but at the end of the day the market seems to be taking its cues from this large inventory build that was unexpected," he said.

"Weak product demand remains a concern," said Hussein Allidina of Morgan Stanley Research. "The picture remains very poor," added Nic Brown of Natixis.

Crude oil prices soared earlier in the week as the market grew more optimistic about global economic growth and energy demand, analysts said.

Investor sentiment was buoyed as equity markets put in strong performances and manufacturing data from the United States reassured nervous investors.

The market was also pushed higher by news of fresh unrest in Nigeria's key oil-producing region.

Nigeria's main rebel group vowed Tuesday to carry out fresh attacks on oil facilities "in the weeks to come" in the key Niger Delta region.

Story from AFP
AFP 02/03/2010 21:19

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