Oil down near $97 as US crude supplies jump

Friday, July 8, 2011, Vol. 35, No. 27

LONDON (AP) — Oil prices slipped to near $97 a barrel Wednesday in Europe after a report showed U.S. crude supplies unexpectedly rose last week, suggesting demand is weak.

Benchmark oil for August delivery was down 14 cents to $97.29 a barrel by midday European time in electronic trading on the New York Mercantile Exchange. Crude gained $2.28 to settle at $97.43 on Tuesday.

In London, Brent crude fell 52 cents to $116.39 per barrel on the ICE Futures exchange.

The American Petroleum Institute said late Tuesday that crude inventories rose 2.3 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 2.1 million barrels.

Inventories of gasoline dropped 1.6 million barrels last week while distillates increased 4.8 million barrels, the API said.

"The only bullish number out of yesterday's report seems to be gasoline inventories," energy consultant The Schork Group said in a report. "All told, the API report strikes us as bearish."

Separate data from the International Energy Agency, however, forecast an increase in demand. In a monthly report, the Paris-based agency said Wednesday that demand next year would rise to 91 million barrels per day, up 1.5 million barrels per day from this year.

The IEA — a group which includes many large oil consumers, such as the U.S. — last month released 60 million barrels of oil reserves onto the market to make up for tight supplies. The move helped dampen prices, though strong demand, particularly from fast-growing countries like China, and tensions in the Middle East have brough them near the $100 mark again.

Later in the day, traders will eye the U.S. Energy Department's Energy Information Administration weekly supply data.

Investors were also closely watching Europe's attempts to contain its debt crisis, which has caused stocks to slide sharply this week. On Tuesday, Moody's Investors Service downgraded its ratings on Irish government bond to junk.

European leaders haven't agreed yet on the nature of a new bailout agreement for Greece and how private holders of the country's bonds could contribute to easing the payout schedule. The uncertainty has been keeping investors on edge.

In other Nymex trading in August contracts, heating oil fell 1 cent to $3.07 a gallon while gasoline was flat at $3.10 a gallon. Natural gas futures gained 3 cents at $4.35 per 1,000 cubic feet.