Oil falls below $134 after drop on U.S. stock build

Thu Jun 26, 2008 12:33pm IST
By Fayen Wong
PERTH (Reuters) - Oil fell below $134 a barrel on Thursday, extending a $2 drop in the previous session after U.S. government data showed a surprise rise in domestic crude stocks, fuelling concerns of a demand slowdown in the world's largest energy consumer.
U.S. light crude for August delivery fell 73 cents to $133.82 a barrel by 0647 GMT, bringing total losses since Wednesday to over $3.
London Brent crude fell 68 cents to $133.65.
"I think the market is still reacting to the overnight U.S. inventory report. The numbers were pretty disappointing," said Tony Nunan, assistant manager of risk management at Mitsubishi Corp in Tokyo.
"Overall, the market is still rangebound between $130-$140 and unless there is a big geopolitical event, demand reduction in the OECD economies is going to keep a lid on prices."
Surging oil prices, which struck a record near $140 a barrel last week, have weighed on the economies of consuming nations.
Many Asian countries, including China, have moved to cut fuel subsidies, prompting worries of a sharp slowdown in oil demand.
U.S. crude oil inventories rose for the first time in six weeks, by 800,000 barrels to 301.8 million barrels, in the week to June 20, the Energy Information Administration reported, countering expectations of a drop.
The build came as U.S. gasoline demand, which has fallen as high fuel prices forced motorists to adjust their driving habits, dipped 2.1 percent over the past four weeks compared with year-ago levels.
Analysts said the market will also eye U.S. economic indicators to have a better gauge of how the economy of the world's largest oil consumer is faring.
Indicators due on Thursday include final gross domestic product for the first quarter and initial claims for jobless benefits, both at 1230 GMT.
On the supply side, U.S. oil major Chevron Corp delayed some exports of Escravos crude oil in Nigeria after armed youths blew up a supply pipeline last week.
Analysts said instability in Nigeria and simmering tensions between Israel and Iran over Tehran's nuclear programme would continue to offer support to oil prices.