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Oil drops below $123 as US inventories increase
Oil fell below $123 a barrel on Wednesday to its lowest in nearly three weeks because of increases in US fuel inventories and a fuel price rise in Asian countries, which is expected to curb demand.
- Reuters
- Published: 00:08 June 5, 2008
London: Oil fell below $123 a barrel on Wednesday to its lowest in nearly three weeks because of increases in US fuel inventories and a fuel price rise in Asian countries, which is expected to curb demand.
Yesterday's losses added to a more than $3 slide on Tuesday when the US Federal Reserve warned the weakness of the dollar threatened to stoke inflation.
Prices rose briefly after US government data showed a decline in crude inventories. They soon fell again, responding to increases in stocks such of gasoline, and distillates such as heating oil and diesel.
US crude fell to as low as $122.57 a barrel, the lowest since mid-May. It was trading $1.78 lower at $122.54 a barrel by 1458 GMT. London's Brent crude was trading $2.13 lower at $122.45.
Data from the US Energy Information Administration showed crude inventories fell by 4.8 million barrels last week. But gasoline and distillates supplies showed larger-than-expected builds because refineries operated at the highest rate since early January.
"Crude was bullish but products were bearish," a broker said.
"Overall sentiment will remain bearish for the moment."
Dollar weakness, which makes dollar-denominated commodities relatively cheap, had been a major factor in oil's rise to a record above $135 a barrel in May.
The high prices have begun to erode demand and have made the cost of subsidies paid out by governments in emerging econ-omies very hard to bear.
India and Malaysia have decided to raised their domestic fuel prices.
The Indian government increased petrol and diesel prices by about 10 per cent yesterday, the biggest increase in years.
currencies
dollar strengthens
The euro traded lower against the dollar yesterday after the US currency was fortified by Federal Reserve Chairman Ben Bernanke's strongest expression of concern yet over the greenback's slide.
The 15-nation euro bought $1.5449 in afternoon European trading, down from $1.5470 late Tuesday in New York.
The dollar, which has been hovering within a few cents of all-time lows against the euro, got a boost on Tuesday when Bernanke suggested more pointedly than ever that the time for cutting US interest rates is over in view of soaring oil and commodity prices and a weakened US currency.
While the euro gained, the British pound declined after a survey showed that consumer confidence in Britain fell sharply in May. The pound sank to $1.9539 from Tuesday's level of $1.9658.
- AP
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