Oil falls on US inventory build, weak data

Oil losses deepened to nearly 3 percent on Wednesday, stung by an across-the-board rise in US petroleum inventories and weak US data adding to economic uncertainties that have weighed on prices over the past week. US gasoline stockpiles rose sharply and demand over the past four weeks fell percent compared with a year-ago, sending market-leading gasoline futures to a four-week low, according to the US Energy Information Administration.
The latest data on US gasoline inventories stoked more concerns about tepid consumption in what is usually the peak summer demand period. Overall crude inventories increased as the US government released more oil from the Strategic Petroleum Reserve, part of a co-ordinated effort with the International Energy Agency to make up for a disruption in supplies from Libya. "The EIA report was bearish with the across-the-board builds," said John Kilduff, partner for Again Capital LLC in New York.
"With increasing concern over the economy and the consumer, the four-week, year-on-year, decline in gasoline demand sticks out as another indicator of consumer weakness and possibly bodes poorly for Friday's employment data." US crude for September delivery hit a session low of $91.22 a barrel, falling $2.57, the lowest intraday price since June 28 and breaking below the 250-day moving average of $91.44. The low was also below the year-end 2010 settlement price of $91.38. By 1:25 pm EDT (1725 GMT), the contract was down $2.10 at $93.69. In London, ICE Brent crude extended losses to hit a session low of $113.05, down $3.41, the lowest front-month Brent price since July 6. It later traded down $3.15 at $113.31.
Brent's premium against US crude, also known as West Texas Intermediate, narrowed to below $22, after hitting $23.03 on Tuesday, which was the widest since the $23.57 record set on July 14. Earlier in the day, oil shrugged off positive data showing US private employers added more jobs than expected in July as analysts said the focus remained on the longer-term challenges for the world's largest economy and the eurozone's troubles.
US gasoline inventories rose for the third week in a row, adding 1.7 million barrels to hit 215.2 million barrels last week. The four-week average demand, at 9.07 million barrels per day, was the lowest since the start of the summer and the lowest since the week to May 20. Adding to investors' concerns, a closely-watch index of the US services sector unexpectedly fell in June from May, adding to gloomy prospects for a rebound in the second half of the year. Reflecting the day's bleak economic reports, Wall Street fell and the Standard & Poor's 500 index that oil traders watch as an alternative demand indicator dropped to a new low for the year. The dollar remained weak, falling 0.62 percent against a basket of currencies.