LONDON: Oil slipped to around $77 per barrel on Wednesday after weekly government data showed a surprise increase in US crude oil stocks after widespread predictions of a drawdown.
The US Energy Information Administration (EIA) said commercial crude inventories rose 360,000 barrels in the week to July 16 to 353.46 million barrels, confounding an average forecast of a fall of 1.4 million barrels.
Domestic gasoline inventories were up 1.12 million barrels at 222.15 million barrels, while analysts polled by Reuters had forecast a build of 900,000 barrels. Distillate stocks rose by a sharper 3.94 million barrels to 166.58 million barrels, compared with forecasts of a 1.7 million-barrel gain.
The figures knocked more than $1 per barrel off US crude oil futures at one point, pushing the September contract down to an intra-day low of $76.81. By 1454 GMT, the September crude contract stood at $77.18, down 40 cents.
London ICE Brent futures fell 30 cents to $75.92.
"This report was negative across the board, with the unexpected build in crude stocks and the build in products too as refineries ramped up production," said Mike Zarembski, senior commodities analyst at Optionsxpress in Chicago.
Before the EIA data, buoyant corporate earnings had raised optimism over the strength of US economic recovery and pushed oil up to a high of $78.57.
Results from US investment bank Morgan Stanley and diversified US manufacturer United Technologies Corp. both helped support sentiment, traders said.
Shares rose on Wednesday in Europe and Asia but were little changed in early Wall Street trading., with traders waiting for Federal Reserve Chairman Ben Bernanke’s testimony to US lawmakers at 1600 GMT. Some in the markets anticipate Bernanke may suggest steps to spur lending.
On Tuesday, the US National Hurricane Center estimated a 60 per cent likelihood that a tropical depression would form near Hispaniola.
The storm could eventually reach the oil-rich Gulf of Mexico. If this were to hit production, it would likely support an oil price rally.
The Center has forecast this year’s Atlantic storm season may be the most intense since 2005, when hurricanes Katrina and Rita nearly paralysed US oil output and refining along the Gulf coast.
China’s oil demand growth accelerated to double digits in June, Reuters calculations of official data showed on Wednesday. The International Energy Agency this week described China as the world’s biggest energy consumer, but China disputed this assessment.
BP Plc rejected a Times of London report on Wednesday that Chief Executive Tony Hayward was to step down within the next 10 weeks. –Additional reporting by Alejandro Barbajosa.
