Brent crude slipped toward $110 a barrel today, dropping for a second straight day as swelling oil inventories in the United States and recent weak data fuelled worries about demand from the world's top consumer.
US oil prices came under further pressure from concerns about a prolonged pipeline outage in the Midwest leading to a buildup in stockpiles near the delivery point of the benchmark contract in Cushing, Oklahoma.
Crude oil stocks in the United States rose 4.7 million barrels for the week ended March 29, according to data from industry group the American Petroleum Institute, much higher than the 2.2 million forecasted by a Reuters poll.
Investors suggest the build in inventory reflects a weak economy which is still struggling to recover and limiting oil demand growth.
"The US economy took such a body blow three, four years ago with the financial crisis, it's like a patient that's been hit by a car, it's going to take a long while for it to recover," said Jim Ritterbusch, president at Ritterbusch and Associates in Galena, Illinois. "And if the patient is in such shape, it is going to take time for us to start seeing demand actually growing to levels before the financial crisis."
Brent dropped 52 cents at $110.17 a barrel by 0217 GMT, after hitting a low of $110.16 earlier in the session. UScrude slid 63 cents to $96.56 a barrel.
And a slew of recent weak economic data shows oil prices may face further headwinds. Britain's manufacturing activity shrank for a second straight month, a survey showed yesterday, while US factory activity grew at its slowest rate in three months in March, indicating a muddy outlook for oil demand.
Europe's demand for oil has also been hit by seasonal refinery maintenance, traders said.
The Brent-US crude spread widened slightly to $13.70 a barrel from its settlement in the previous session.
Brent's premium to US crude rose to a more than one-week high of $14.66 yesterday amid uncertainty surrounding the impact of the ruptured Exxon Mobil Pegasus pipeline in the US Midwest.
Investors said the pipeline shutdown could potentially contribute about 300,000 to 400,000 barrels a week to crude inventories at Cushing.
Exxon said it was developing a plan to excavate, remove and replace the ruptured portion of the pipeline, while a US pipeline agency said Exxon would need to test and submit a remedial work plan before it could resume operations.
Markets are now waiting for key US jobs data later this week for clues on the health of the world's largest economy and indications on its appetite for oil.
Reuters
