Oil fell $1 a barrel on Wednesday after data showed US crude inventories swelled to the highest level in nearly two years and the World Bank cut its 2009 forecast for Chinas economic growth. In its weekly report, the US Energy Information Administration (EIA) said crude oil stocks rose 2.0 million barrels to 353.3 million last week - double the increase forecast by analysts.
Gasoline supplies jumped by 3.2 million barrels, countering forecasts of a 1.2-million-barrel drop. "The numbers look bearish. Its the build in gasoline that was most dramatically bearish since the market was looking for a decline," said Tim Evans, analyst at Citi Futures Perspective in New York.
US light crude fell $1.02 to settle at $48.14 a barrel. London Brent crude tumbled 58 cents to settle at $47.66 a barrel. In late post-settlement activity, US oil rose to $49.46 a barrel after the US Federal Reserve said it will buy up to $300 billion worth of longer-term government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions.
Slumping demand and rising inventories have helped drag oil off record highs over $147 a barrel struck in July as the economic meltdown hit consumption across the globe. Further weakness came after the World Bank cut its forecast for 2009 economic growth in No 2 consumer China and said Beijing would undermine its own medium-term goals if it tried to offset the slowdown by further boosting investment.
Mike Wittner, global head of oil research at Societe Generale, said oil prices were near the top of the range seen over the last three months. "I dont see any reason fundamentally why we should break out of this range to the upside," he said. "The picture remains the same: weak economy, weak oil demand."
The steep drop in oil prices pushed the Organisation of Petroleum Exporting Countries to agree to deep production cuts last year. On Sunday, the group agreed to leave output targets unchanged but promised stricter enforcement of existing curbs. Saudi Arabian Oil Minister Ali al-Naimi on Wednesday said prices have stabilised and the next thing to hope for was a gradual improvement in prices.