Oil prices dip before US energy report

October 28, 2010 | 09:08

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World oil prices fell on Wednesday on the back of the strengthening dollar and forecasts of surging American crude reserves in the upcoming weekly US inventories report.

New York's main contract, light sweet crude for delivery in December, slid 91 cents to $81.64 a barrel.

Brent North Sea crude for December delivery retreated 88 cents to $82.78 per barrel in late morning London trade.

Later on Wednesday, the US government's Department of Energy will publish its report on oil reserves for the week ending October 22.

Ahead of the DoE, industry group the American Petroleum Institute (API) said Tuesday in a separate report that US crude inventories jumped last week by 6.4 million barrels.

That was the sharpest API rise in seven months and beat market expectations for an increase of 1.1 million barrels.

Oil "has dropped below the $82 mark ... with a considerably firmer US dollar and an unexpectedly sharp rise in US crude inventories putting the pressure on prices," said Commerzbank analyst Carsten Fritsch.

The stronger greenback makes dollar-priced crude more expensive for buyers using weaker currencies, and therefore tends to dampen demand and prices.

Fritsch added: "The DoE publishes the official inventory data today. After the API report, there are now upside risks for the forecast of an inventory build of one million barrels of crude."

Oil had pushed higher on Tuesday on the back of a modest increase in US consumer confidence.

The Conference Board consumer confidence index for October stood at 50.2, up from 48.6 in September, beating consensus forecasts of 49.0. However, the index level remained very close to historic lows.

Consumer confidence is seen as a pivotal indicator of the health of the US economy, which is driven mostly by consumer spending.

AFP

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