Oil prices dropped a dollar yesterday as US inventory data showed a seventh straight weekly build in crude stocks and traders absorbed signs of slowing demand growth in China.
US light crude fell $1.48 (€1.14) to $52.75 a barrel, nearly $5 below an all-time peak of $57.60 on March 17th. London Brent was down $1.13 to $51.90 a barrel.
Prices dropped after the US Energy Information Administration reported a 5.4 million barrel rise in crude inventories last week to 314.7 million barrels, the highest level in nearly three years.
The crude stock build - which was driven by a big rise in imports - outweighed the impact of a 2.9 million barrel fall in gasoline stocks to 214.4 million.
Gasoline demand has been running 2 per cent higher than last year in the past four weeks.
"Crude supply is no longer an issue, we have plenty of it.
However, that crude number is being countered to some extent by the large decline in gasoline stocks," said Jim Ritterbusch of Ritterbusch and Associates in Illinois.
Oil prices have risen nearly 25 per cent this year, as dollar weakness has encouraged funds to switch money out of treasury markets and into commodities.
Rapid world demand growth has strained international supply but analysts say that oil demand growth in China, the world's number two oil consumer, may also be slowing more sharply than expected.
Diesel exports have surged, gasoline shipments are on the rise and fuel oil imports remain below par, while commercial oil inventories are still unusually high after a wave of stockpiling in the last months of 2004.
"The market does not yet seem aware that Chinese demand, the principal engine of global growth, is showing clear signs of running out of steam," said Deborah White of SG Commodities.
The Opec producer cartel lifted its formal output ceiling by 500,000 bpd to 27.5 million bpd in mid-March in an effort to pump up second-quarter global stocks, creating a cushion for anticipated robust fourth quarter demand.
The head of the International Energy Agency said yesterday that slowing consumption growth in China should ease fears of a supply crunch. - (Reuters)
