Wednesday April 15, 04:43 PM
Oil prices slip as US crude stocks hits 18-yr high
LONDON (AFP) - World oil prices fell Wednesday on news that US crude reserves had hit the highest level since 1990, indicating fragile demand in the recession-blighted American economy.
In late afternoon trade, London's Brent North Sea crude for May delivery dropped 54 cents to 51.42 dollars per barrel.
New York's main futures contract, light sweet crude for delivery in May, sank 40 cents to 49.01.
The US government's Department of Energy (DoE) said crude stocks surged 5.6 million barrels in the week ending April 10 to 366.7 million barrels, the highest level since September 1990.
Analysts polled by Dow Jones Newswires had predicted a smaller weekly gain of 2.1 million barrels. Crude inventories are now 16.5 percent higher than at the same stage last year.
The DoE report is a key focus for the oil market because the United States is the world's biggest energy consuming nation, followed by number two China.
The market was also dragged lower by official data showing that US industrial production fell in March for the fifth consecutive month, by 1.5 percent, to the lowest level in a decade amid a prolonged recession.
In further gloomy news on Wednesday, OPEC cut its estimate for world crude demand again, arguing that a "devasting contraction" in consumption would keep prices under pressure in the months ahead.
"In the coming months, the market is expected to remain under pressure from uncertainties in the economic outlook, demand deterioration and the substantial overhang in supply," the Organization of Petroleum Exporting Countries wrote in its latest monthly report.
It said "vigilant monitoring is essential" ahead of the cartel's next meeting at the end of May at which some members are expected to push for further output cuts to help support prices.
"Oil demand is suffering more and more from the world economic recession," it said, adding that this trend had resulted in another downward revision in its forecast for demand this year of 0.4 million barrels per day (bpd).
OPEC estimated that demand would contract by 1.37 million bpd or 1.6 percent in 2009.
In its previous monthly bulletin released in March, OPEC had been pencilling in a contraction of 1.01 million bpd for 2009.
"World oil demand is already out of its high demand seasonality achieving nothing but devastating contraction," OPEC said.
Traders also fretted over the International Energy Agency's forecast last Friday that the global economy would contract 1.4 percent in 2009, instead of modest expansion.
The IEA slashed 2009 global oil demand by one million barrels per day (bpd) to 83.4 million barrels per day, about 2.4 million bpd less than in 2008 and the lowest level since 2004.
Crude prices had risen in earlier trade on Wednesday as traders tracked news of a fresh supply disruption in Nigeria.
A fire at a key Shell pipeline in volatile southern Nigeria has led to a production loss of 180,000 barrels a day involving a range of companies, an industry source said.
The loss includes 130,000 barrels per day for Anglo-Dutch oil giant Shell, 30,000 barrels for French group Total and another 20,000 barrels from various other operators, the source told AFP on condition of anonymity.
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