Oil drops to near $73 amid jump in US supplies

By CHUN HAN WONG

posted: 1 HOUR 32 MINUTES AGO

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SINGAPORE -Oil prices fell to near $73 a barrel Wednesday in Asia after a report showing unexpected growth in U.S. crude inventories cast more doubt on the recovery in the world's biggest economy.

Benchmark crude for March delivery was down 53 cents at $73.22 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract jumped $1.86 to settle at $73.75 a barrel on Tuesday.

U.S. crude stocks jumped 7.2 million barrels last week, the American Petroleum Institute said late Tuesday, suggesting weak consumer demand for fuels like gasoline and heating oil. Analysts had expected an increase of 2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Department's Energy Information Administration has delayed announcement of its inventory report until Friday because of snow storms. The report was expected later Wednesday.

Sluggish crude demand is weighing on oil prices as investors continue to mull over concerns about the health of the global economy.

"While China's lending restrictions and potential changes in US banking regulations were the first seeds of concern sown in the minds of investors, the latest has come about due to the short-term financing needs in Southern European countries," Barclays Capital said in a report.

"In the short-term, oil prices may be caught in between the shrapnel of negative macro sentiment yet improving fundamentals, resulting in some heightened volatility," Barclays said.

In other Nymex trading in March contracts, heating oil fell 1.1 cent to $1.9264 a gallon, and gasoline was down 0.6 cent at $1.9227 a gallon. Natural gas rose 8.5 cents to $5.375 per 1,000 cubic feet.

In London, Brent crude was down 60 cents at $71.53 on the ICE futures exchange.

2010-02-10 00:55:08