SINGAPORE: Oil fell on Wednesday after an industry report showed a surprise gain in US crude inventories and the downgrade of Ireland's credit rating to junk status, reinforcing views of a well-supplied market as the outlook for demand deteriorates.
US crude fell 39 cents to $97.04 a barrel at 0057 GMT, while Brent shed 22 cents to $117.53.
On Tuesday, US crude futures posted stronger gains than Brent, narrowing the spread between the contracts to below $21 a barrel. The previous session, Brent's premium had pushed to within pennies of its June 15 record of $23.34.
US stockpiles of distillates including heating oil and diesel posted a larger-than-expected increase last week, the American Petroleum Institute (API) said late on Tuesday, while Europe's debt crisis is prompting forecasters to trim their predictions for demand growth.
Crude inventories in top consumer the United States rose 2.3 million barrels last week, the API said, compared to expectations for a decline of 1.8 million.
Distillates climbed 4.8 million barrels, 12 times as much as forecast, while gasoline stocks unexpectedly fell by 1.6 million barrels. Government statistics from the Energy Information Administration will follow on Wednesday at 1430 GMT.
European Union leaders are poised to hold an emergency summit after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens' debts and to stop contagion spreading to Italy and Spain.
Moody's cut Ireland's credit rating to junk, warning that the debt-laden country would likely need a second bailout.
Global oil demand will grow less than previously forecast this year and in 2012 due to a more moderate economic recovery and higher fuel prices, the top US energy forecasting agency said on Tuesday.
In its new monthly outlook, the EIA cut its forecast for 2011 world oil demand growth by 270,000 barrels per day (bpd) to a 1.43 million-bpd increase this year. Oil demand in 2012 will rise 1.58 million bpd, about 10,000 bpd lower than the agency forecast last month.
The forecast came after OPEC also said that world oil demand would grow more slowly in 2012 because of a fragile global economy and deepening decline in consumption in Europe.
The Organization of the Petroleum Exporting Countries predicted world oil consumption would rise by 1.32 million bpd in 2012, slightly lower than the growth of 1.36 million bpd expected this year.
Royal Dutch Shell said on Tuesday it had lifted a force majeure on its Nigerian Bonny Light crude oil loadings which was declared on June 13 due to leaks and fires on its Trans-Niger Pipeline.
Copyright Reuters, 2011