Oil dips on high US fuel stocks

Published Dec 9, 2010

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New York - Oil prices slid for a second day on Wednesday as unexpectedly large increases in US fuel inventories and a stronger dollar sparked selling in crude, which hit a 26-month high early in the previous session.

Prospects that US President Barack Obama would push through a tax cut extension deal helped limit the day's losses because more money in consumer pockets could boost energy demand. The energy complex also drew support as wintry weather hit the United States early, analysts said.

US crude for January delivery fell 43 cents to $88.26 a barrel at 12:35 p.m. EST (1735 GMT), well off Tuesday's session high of $90.76, the highest since October, 2008. In London, ICE January Brent dropped 49 cents to $90.90 a barrel.

US gasoline stockpiles rose by a more-than-expected 3.8 million barrels last week, the Energy Information Administration's inventory data showed.

Stocks of distillates, which include heating oil and diesel fuel, rose by 2.2 million barrels, dashing forecasts for a modest drawdown.

The fuel stocks increase overshadowed a larger-than-expected drawdown of 3.8 million barrels in crude inventories on the heels of a surprisingly big jump in refinery utilisation.

“We don't have the extremes of yesterday's API number, but on the surface this is a bearish report showing lacklustre demand with the increase in products,” said Mike Zarembski of OptionsXpress in Chicago.

The industry group American Petroleum reported late on Tuesday that domestic crude stocks jumped 7.3 million barrels last week. Distillate stocks rose 1.7 million barrels while gasoline supplies surged 4.8 million barrels, it said. - Reuters

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