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Oil slumps as US crude stocks climb

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(Globalpost/GlobalPost)

Global oil prices tumbled on Wednesday following news of a larger-than-expected jump in crude stockpiles in top consumer the United States, dealers said.

Brent North Sea crude for delivery in May slumped $2.31 to $108.38 a barrel in late afternoon deals in London.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for May, dived $1.81 to $95.38 per barrel.

The market nosedived after the US government's Energy Information Administration (EIA) announced that American crude reserves rallied by 2.7 million barrels last week to 388.6 million barrels.

That was far bigger that market expectations for a gain of 1.5 million barrels, according to analysts polled by Dow Jones Newswires.

The news also sent total stocks to the highest level since July 1990.

Rising US crude stockpiles tend to send the oil market lower, because it indicates weakening demand in the world's top consuming country.

"The selling really accelerated when the EIA's latest crude inventories data showed a build of 2.7 million barrels last week which was more than ... expected," said analyst Fawad Razaqzada at traders GFT Markets.

"The build suggests that supply is rising again in North America and demand is remaining weak."

He added that the market could also witness short-term profit-taking ahead of Thursday's central bank decisions in London and Frankfurt, and before Friday's vital US economic data.

A pipeline closure in the US had already sparked fears that inventories could rise, dealers said.

ExxonMobil's Pegasus pipeline in Arkansas, a 95,000 barrel-a-day line, has been down since an oil spill on Friday.

There are concerns the closure could lead to a build-up of stockpiles at the Cushing, Oklahoma, delivery point as crude cannot be pushed through to refineries. Such a build-up puts a downward pressure on prices.

"Uncertainty surrounding the impact of the ruptured pipeline has kept US light sweet crude prices volatile," said Ker Chung Yang, senior investment analyst at Phillip Futures in Singapore.

The market is also eyeing a policy meeting on Thursday of the European Central Bank (ECB), which is at the forefront of the fight to tackle the debt crisis in the eurozone, analysts said.

Analysts expect the ECB to hold off from cutting rates or announcing any other policy moves to keep up pressure on governments to solve the crisis in the eurozone.

On Friday, attention will switch to the vital US non-farm payrolls figures that are due for publication, and are widely considered to be a key indicator for the health of the world's biggest economy.

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http://www.globalpost.com/dispatch/news/afp/130403/oil-slumps-us-crude-stocks-climb