Wednesday July 22, 01:37 PM
Oil prices drop before US energy report
LONDON (AFP) - Oil prices weakened on Wednesday after recent gains as traders banked profits and awaited the latest weekly snapshot of crude reserves in key consumer the United States.
Brent North Sea crude for September delivery fell 47 cents to 66.40 dollars per barrel.
New York's main futures contract, light sweet crude for September, dropped 78 cents to 64.83 dollars. The August contract expired on Tuesday at 64.72 dollars.
"Oil is lower after some profit-taking ... as traders wait in anticipation of the US weekly oil reserves report released later today," said ODL Securities analyst Marius Paun.
"Investors (have) already priced in a likely drop in crude stocks and (will be) closely watching US Federal Reserve chairman Ben Bernanke's ongoing semi-annual economic report to Congress for indications on the state of the US economy."
The US government's Department of Energy (DoE) will release its weekly oil reserves report, with the market anticipating lower crude stockpiles as the recession-mired economy shows signs of recovery.
A drop in US crude oil stocks is regarded as an indication of demand picking up in the world's biggest energy consuming nation.
"Today, all attention will be on the weekly US fuel inventories with expectations for a modest draw in crude inventories and a small rise in gasoline (petrol) inventories," said VTB Capital analyst Andrey Kryuchenkov.
Oil price rose on Tuesday, lifted by upbeat US company results which sparked renewed hope for economic recovery.
Beyond the DoE report, investors were closely watching Bernanke's key economic report to Congress.
The Fed chief told lawmakers on Tuesday there were "notable improvements" in financial markets and a somewhat brighter economic outlook but also considerable risks led by high unemployment.
"In light of the substantial economic slack and limited inflation pressures, monetary policy remains focused on fostering economic recovery," Bernanke told the House of Representatives Financial Services Committee.
Analysts said Bernanke's comments suggested the economy was on the mend but it was still not yet strong enough for an end to the unprecedented stimulus spending.
His comments also suggested the Federal Reserve would maintain its aggressive stand for some time.
"The present focus of policy remains on stimulating economic activity," said economist Nigel Gault at IHS Global Insight.
Bernanke's two-day congressional testimony ends later Wednesday.
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