Oil prices fell to near $106 a barrel Wednesday after a report showed a larger-than-expected jump in U.S. crude supplies, suggesting demand remains weak.
By early afternoon in Europe, benchmark oil for May delivery was down 91 cents to $106.42 in electronic trading on the New York Mercantile Exchange. The contract was up 30 cents to settle at $107.33 per barrel in New York on Tuesday.
In London, Brent crude for May delivery was down $1.20 at $124.34 per barrel in London.
The American Petroleum Institute said late Tuesday that crude inventories rose 3.6 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 2.8 million barrels.
Inventories of gasoline increased 1.3 million barrels last week while distillates tumbled 1.4 million barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data — the market benchmark — later Wednesday.
If the API figures stand, U.S. crude stockpiles would be at their highest level in seven months, according to analysts from Commerzbank in Frankfurt.
Crude has jumped from $75 in October as signs of an improving U.S. economy bolstered investor confidence. However, demand hasn't picked up yet and economists expect consumption could remain tepid with U.S. gasoline prices nearing $4.00 a gallon.
Some analysts forecast weaker economic growth and demand from China, the world's second largest economy, will pull oil prices lower. Capital Economics expects Brent crude to fall to below $100 by the end of the year.
"Perhaps the biggest concerns are the signs of weakness in China," Capital Economics said in a report. "The years of sustained double-digit growth in China's economy are now ancient history and the risks over the next several years, both to growth and commodity demand, lie overwhelmingly on the downside."
In other energy trading, heating oil was down 2.19 cents at $3.2141 per gallon and gasoline futures fell 4.22 cents at $3.3442 per gallon. Natural gas slid 1.2 cents at $2.282 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.
- New York Mercantile Exchange
- American Petroleum Institute