LONDON: Oil slid towards $110 a barrel on Wednesday as oil stockpiles swelled in top oil consumer the United States, where a struggling economy is limiting demand for fuel.
Further pressure came from concern a prolonged oil pipeline outage in the US Midwest would cause inventories to build up near the delivery point of the benchmark contract in Cushing, Oklahoma.
Brent lost 42 cents to trade at $110.27 a barrel by 1020 GMT, after hitting a low of $110.02 earlier in the session. U.S crude slid 38 cents to $96.81.
"The US economy took such a body blow three, four years ago with the financial crisis, it's like a patient that's been hit by a car, it's going to take a long while for it to recover," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Crude oil stocks in the United States rose 4.7 million barrels last week, according to data from industry group the American Petroleum Institute, much higher than the 2.2 million forecast by a Reuters poll.
A slew of recent weak economic data shows oil prices may face further headwinds.
Britain's manufacturing activity shrank for a second straight month, a survey showed on Tuesday, while US factory activity grew at its slowest rate in three months in March, indicating a muddy outlook for oil demand.
Europe's demand for oil has also been hit by seasonal refinery maintenance, traders said.
The Brent-US crude spread narrowed slightly to $13.41 a barrel from its settlement in the previous session.
Brent's premium to US crude rose to a more than one-week high of $14.66 on Tuesday amid uncertainty surrounding the impact of the ruptured Exxon Mobil Pegasus pipeline in the US Midwest.
"We could see prices for WTI come under pressure over the trading day, given the expected uptick in crude inventories following the (pipeline) shutdown," said JBC Energy analysts.
Investors said the pipeline shutdown could potentially contribute about 300,000 to 400,000 barrels a week to crude inventories at Cushing.
Exxon said it was developing a plan to excavate, remove and replace the ruptured portion of the pipeline, while a US pipeline agency said Exxon would need to test and submit a remedial work plan before it could resume operations.
Comments
Comments are closed for this article.