Oil falls below $80

Oil prices fell below $80 a barrel on Wednesday, pressured by a US inventory report showing rises in crude and distillate fuel stocks despite severe winter weather. Crude stocks, expected to rise by 1.2 million barrels, shot up by 3.7 million, the Energy Information Administration said. Inventories of distillates, which include heating oil and diesel, rose by 1.4 million barrels, instead of falling as forecast.
Heating oil stockpiles, however, dropped by 1.1 million barrels to 42 million barrels last week as a freeze lingered in the giant US Northeast market and other parts of the nation. "It's a bearish report that points back to weak underlying fundamentals in the domestic petroleum market," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
"Distillate stocks are up despite the cold weather last week, which means there was no demand for anything except the heating oil." US crude for February delivery fell $1.14 cents to settle at $79.65 a barrel. It earlier fell to $78.37, the lowest since December 29. In London, Brent crude for February delivery, which expires on Thursday, fell 99 cents to settle at $78.31 a barrel.
The price of US crude has fallen more than $4 from a 15-month high of $83.95 reached on Monday and some analysts believe it could have further to fall. "It is becoming increasingly apparent that the upside breakout above key $82 resistance seen last week never got going and seems to have been no more than a short-lived burst higher," Edward Meir of MF Global said in a report.
Oil inventories have bulged in the United States over the past 18 months as the economic crisis has cut energy demand. Very cold weather over the past two weeks was expected to have helped to erode stocks. Warmer weather across the central and eastern United States is expected to arrive in the next few days, DTN Meteorlogix said, reducing heating demand.
Investors have looked to wider economic data in recent months for signs of economic recovery and a potential rebound in energy demand. On Wednesday, US stocks rose as investors bought financial and technology shares ahead of earnings from bellwethers Intel Corp and J.P. Morgan Chase. Oil was pressured on Tuesday by China's move to raise banks' cash reserve requirements, the latest step towards tightening monetary policy, which some traders see potentially dampening energy demand. China is the world's second-largest oil consumer after the United States.