Brent crude fell today after industry data showed US crude oil stocks rose sharply last week and China said it would roll out more measures to fight inflation.
ICE Brent crude for June fell 24 cents to $122.17 a barrel, after briefly turning positive as the dollar pared earlier gains. US crude lost 53 cents to $110.52.
The American Petroleum Institute (API) said crude stocks rose by 3.2 million barrels for the week ended April 29th, contrary to analyst expectations for a gain of 2 million barrels. This came even as crude imports fell by 1 million barrels per day last week to 8.94 million bpd.
The US Energy Information Administration's (EIA) report will be released later today.
Oil prices dropped more than 2 per cent yesterday, as an interest rate increase by India added to concerns about demand and gains in the dollar helped spark a technical sell-off.
The dollar index , which tracks the greenback against a basket of currencies, edged up 0.1 per cent. The index has seesawed as it tries to recover from a three-year low.
A broader sell-off in commodities that dragged equities lower dampened investor appetite for risk-taking, after fear that huge price gains last month had made everything from oil to silver too costly.
From a technical perspective, Brent crude is forecast to fall further to $119.03 per barrel, while US crude futures are headed to $108.00.
Analysts said a fear premium is in place due to ongoing tensions in the oil-producing regions of North Africa and the Middle East and the recent death of al-Qaeda leader Osama bin Laden.
World leaders hailed bin Laden's death but the euphoria was tempered by fears of retaliation and warnings of renewed vigilance against attacks.
In Libya, there was no let-up in the conflict as fighting between rebels and forces loyal to Muammar Gadafy forced thousands of refugees to flee western Libya on foot to the Tunisian border and by boat to Europe, the United Nations said yesterday.
Opec output fell to a 23-month low in April as extra oil from Saudi Arabia and Nigeria did not make up for supplies lost due to fighting in Libya and oilfield maintenance in Angola, a Reuters survey found yesterday.
Supply from all 12 members of the Organisation of the Petroleum Exporting Countries (Opec) averaged 28.42 million barrels per day (bpd), down from a revised 28.48 million bpd in March, the survey of oil companies, officials and analysts found.
Reuters