Oil plunges below $96 on U.S. inventory build

LONDON Wed Oct 1, 2008 9:56pm IST

An oil facility is seen at Venezuela's western Maracaibo lake November 5, 2007. Oil plummeted below $96 a barrel on Wednesday as weekly U.S. data showed a larger than expected increase in crude inventories and falls in fuel demand. REUTERS/Isaac Urrutia/Files

An oil facility is seen at Venezuela's western Maracaibo lake November 5, 2007. Oil plummeted below $96 a barrel on Wednesday as weekly U.S. data showed a larger than expected increase in crude inventories and falls in fuel demand.

Credit: Reuters/Isaac Urrutia/Files

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LONDON (Reuters) - Oil plummeted below $96 a barrel on Wednesday as weekly U.S. data showed a larger than expected increase in crude inventories and falls in fuel demand.

U.S. crude fell more than $4 to as low as $95.95 a barrel, reversing a rise of more than $2 to as high as $102.84 earlier in the day. It was trading $2.92 lower at $97.72 a barrel by 1530 GMT.

London Brent crude was $3.77 down at $94.40.

Crude oil inventories in the United States, the world's largest oil consumer, increased by 4.3 million barrels last week, data from the Energy Information Administration (EIA) showed. Analysts had expected a 2.4 million barrel increase.

"The numbers look bearish. Recent EIA data about U.S. demand has also been negative," Mark Kellstrom, analyst with Strategic Energy Research, said.

"This probably continues to weigh on crude prices."

The government data also showed a surprise 900,000 barrel increase in gasoline stocks, against analysts' forecasts for a 1.6 million barrel drop. Total oil product demand over the past four weeks fell 7.1 percent from a year earlier.

New York RBOB gasoline futures fell more sharply than crude. Heating oil futures were trading lower despite a drawdown in distillate inventories, including heating oil.

"The only supportive figure was the 2.3 million barrel drop in distillate stocks, but this bullish item should be easily overshadowed by the other data," said Jim Ritterbusch, the president of Ritterbusch & Associates.

"All in all, a drop to below $95 in November crude could be seen today until financials come to the rescue."

The market focus will shift to the U.S. Senate's move on a financial bailout package.

The Senate will vote late on Wednesday on a new version of the $700-billion rescue package for Wall Street, rekindling hopes that the credit crisis can be eased before claiming yet more banks and causing further damage to the global economy.

In broader global market rallies on Tuesday, U.S. crude settled $4.27 higher at $100.64, rebounding from Monday's sharp $10 loss that was in reaction to the rejection of the original rescue plan by the U.S. House of Representatives.

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