Oil slips as U.S. inventories weigh

By Gene Ramos

NEW YORK (BestGrowthStock) – U.S. oil prices edged slightly lower on Wednesday as a rise in U.S. crude and refined product inventories outweighed support from strong Chinese demand data and the resumption of European airline flights.

U.S. crude oil inventories rose 1.9 million barrels last week despite a forecast for a slight drop, Energy Information Administration (EIA) oil inventory data showed. (EIA/S: )

Distillate and gasoline stockpiles increased more than expected. Analysts said the build in inventories raised concerns about a recovery of U.S. fuel demand, which was hit hard by the recession.

“The energy complex absorbed today’s bearish EIA report quite well, especially in view of some dollar strength and only limited change in the equities,” said Jim Ritterbusch, president of Ritterbusch & Associates, independent trading consultants in Galena, Illinois.

U.S. June crude futures ended down 17 cents at $83.68 a barrel, after dropping to a session low of $82.92. Volume for the new front-month was heavy at an estimated 403,000 contracts, according to Reuters data.

Earlier, crude prices found strength from the resumption of European flights which bolstered the outlook for jet fuel demand and lifted U.S. heating oil futures, the benchmark for jet fuel trading.

ICE Brent crude settled 90 cents higher at $85.70 a barrel, after hitting a high of $86.16. Volume reached 200,000 contracts.

Flight bans related to an ash cloud caused by an Icelandic volcanic eruption were lifted on Tuesday, alleviating concerns some investors had over the impact the disruptions would have on fuel demand.

“The only token support I can see on this heating-oil led rise in crude futures is some fundamental support developing as European airports have reopened after being disrupted for days by the spread of the Icelandic volcanic ash,” said Tim Evans, analyst at City Futures Perspective in New York.

“And that is restoring some jet fuel demand that had been absent recently,” Evans added.

CHINA STRENGTH

Data showed China’s implied oil demand in March rose 12.3 percent from a year earlier, the seventh month of double-digit growth in a row, as warming weather boosted dormant farming activities.

The world’s second-largest oil user consumed 8.25 million barrels of oil per day last month, 4.6 percent or 400,000 bpd less than February, according to Reuters calculations based on official data.

Rising consumption in China has helped support crude prices as demand from the United States and other developed economies struggles to rebound from the recession.

The strength of the dollar against the euro also helped pin down crude futures. The euro weakened for the fifth day against the greenback due to ongoing uncertainty about Greece’s debt crisis. (FRX/: )

A stronger dollar makes commodities more expensive for those holding alternative currencies.

In related news, 11 workers were missing and 17 injured in an explosion at a Transocean (RIGN.S: ) (RIG.N: ) oil drilling rig off Louisiana, and crews were fighting the fire 16 hours later, the U.S. Coast Guard said on Wednesday.

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(Additional reporting by Robert Gibbons in New York, Joe Brock and Ikuko Kurahone in London, Alejandro Barbajosa in Singapore; editing by Jim Marshall)

Oil slips as U.S. inventories weigh