Oil falls below $82 as US crude supplies rise

AP News
Posted: Oct 27, 2010 4:26 AM
Oil falls below $82 as US crude supplies rise

Oil prices sank below $82 a barrel Wednesday in Asia after a report showing a surge in U.S. crude supplies undermined optimism that demand is improving.

Benchmark oil for December delivery was down 81 cents at $81.74 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 3 cents to settle at $82.55 on Tuesday.

The American Petroleum Institute said late Tuesday that crude inventories rose 6.4 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast an increase of 1.5 million barrels. Inventories of gasoline fell while distillates rose, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.

Investors are also looking for hints about the size of a Treasury bond-buying program the Federal Reserve may implement next week _ known as quantitative easing _ to spur economic growth.

"The surprisingly large build in API crude oil stocks could work with a stronger U.S. dollar, a watered-down (quantative easing) event and technical resistance to turn oil prices lower from here," Cameron Hanover said in a report.

Some analysts expect a growing global economy, especially in emerging markets such as China, will boost crude demand. Bank of America Merrill Lynch raised its 2010 forecast for Chinese economic growth to 10.3 percent from 10.1 percent.

"Oil prices remain stuck in their low $80s range," Barclays Capital said in a report. "We see the global economic recovery being largely intact with further support coming through for oil demand."

In other Nymex trading in November contracts, heating oil fell 2.11 cents to $2.229 a gallon and gasoline dropped 0.21 cent to $2.073 a gallon. Natural gas slid 5.5 cents to $3.299 per 1,000 cubic feet.

In London, Brent crude fell 67 cents to $82.97 a barrel on the ICE Futures exchange.