Oil prices slipped below $80 a barrel on Wednesday after a US government report showed a surprise build in stockpiles of crude oil. US crude eased 10 cents to $79.95 a barrel by 2:30 pm EDT (1830 GMT), adding to a roughly $4 slump from a peak hit September 20. Brent crude was down 12 cents at $77.26.
The losses came after the US Energy Information Administration reported a build in nation-wide crude supplies of 1.2 million barrels last week, countering expectations for a drawdown. Limiting oil's losses, the EIA report also showed that distillate supplies including heating oil fell 1.2 million barrels against forecasts for a build. "This is bearish for crude oil and bullish for distillates," said Tim Evans, energy analyst at Citigroup Futures Research in New York.
Oil had held above $80 for much of the last three weeks, despite Opec's agreement on September 11 to boost output by 500,000 bpd from November 1. Oil ministers from Venezuela and Qatar have brushed off the need for a further output rise.
Qatar's Abdullah al-Attiyah said speculative investment was responsible for $80-plus oil. But a rebound in the value of the US dollar from record lows, combined with evidence of slowing energy demand, have kept oil from revisiting the all-time peak.
"At this level prices are starting to hurt demand, especially in the developed countries," said Tony Nunan of Mitsubishi Corp. "If you're thinking there's lower demand and higher Opec output then why not take your profits now?"
Although much of the hurricane season has passed, oil traders remain on alert for any sign of foul weather that could disrupt oil production or refining in the Gulf of Mexico. A stormy weather system in the eastern Gulf could form into a cyclone, but is not expected to affect energy operations, forecasters and company officials said.
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