Oil falls further as US crude stocks soar

Global oil prices fell further on Wednesday after US crude stockpiles surged by more than eight times the expected amount, suggesting weak demand in the world's biggest oil consuming nation.

The market was already in negative territory on profit-taking, having earlier rebounded on uncertainty following the death of Hugo Chavez, the president of major Latin American crude producer Venezuela.

In late afternoon deals, Brent North Sea crude for delivery in April dropped 64 cents to $110.97 per barrel.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for April shed 72 cents to $90.10 a barrel.

Prices accelerated their losses after the US government's Department of Energy announced that American crude inventories soared by 3.8 million barrels in the week ending March 1.

That was far more than market expectations for a modest gain of 500,000 barrels, according to analysts polled by Dow Jones Newswires. Crude oil stocks currently stand at their highest weekly level since June 29, 2012.

The market was "already in a falling trend this afternoon and this is an excuse to sell off further", said SEB commodities analyst Bjarne Schieldrop.

Venezuela was plunged into uncertainty meanwhile as 58-year-old Chavez -- who had dominated the oil-rich country for 14 years -- died after a long struggle with cancer.

"Chavez's death has opened up some geopolitical risk with uncertain transition to new ruler," added Schieldrop.

"However, he has been sick for a while so (this was) probably highly priced-in already.

"Crude prices (were) losing altitude already after yesterday's rise," he added.

Venezuela has the world's largest proven oil reserves, according to the Organization of the Petroleum Exporting Countries (OPEC).

The government says Venezuela produces three million barrels of oil per day, although OPEC says the figure is 2.3 million. Oil production accounts for 90 percent of the country's hard-currency revenue.

"We do not expect to see any drastic changes in Venezuela’s oil operations, especially following recent corporate news from the state oil company PDVSA that Venezuela's oil industry is operating normally and no disruption is expected following the death of President Hugo Chavez," noted Sucden analyst Myrto Sokou.