Oil extended losses today as a jump in US crude inventories indicated demand was slow to pick up in the world's top consumer, while Europe's fiscal troubles continued to dampen expectations for growth.
A strong dollar also weighed on prices. The greenback held its strength against major currencies with the euro falling to a 10-month low against the dollar as investors remained sceptical about whether the EU will agree on a quick rescue plan for heavily indebted Greece at a summit this week.
US crude inventories rose more than forecast last week, a government report showed yesterday.
"Crude inventory gains surpassed most estimates and that indicates that the economic recovery has not really translated into a crude oil demand increase," said Serene Lim, a Singapore-based oil analyst at ANZ.
"Prices will be within a range between $78 and $82 unless the dollar gains further."
US crude for May delivery shed 13 cents to $80.48 a barrel at 0510 GMT, having traded in a range of between $69 and $84 for all of this year. ICE London Brent for May declined 16 cents to $79.46.
Commercial crude oil stockpiles in the United States jumped by 7.3 million barrels to 351.3 million barrels in the March 19 week, the Energy Information Administration (EIA) said yesterday, eclipsing analysts' average expectations of a 1.5 million-barrel rise.
Gasoline stockpiles dropped by a larger-than-expected 2.7 million barrels, while distillates including heating oil and diesel shed 2.4 million barrels, falling for an eighth consecutive week.
EIA data also showed total US oil consumption increased by 3.6 per cent last week. But demand in Europe weakened sharply in January, down by 1.55 million barrels per day (bpd) from a year earlier, Barclays Capital said citing data published by the Joint Oil Data Initiative (JODI).
That was the largest monthly drop for European oil demand ever, according to Barclays.
"European oil demand has become significantly worse in recent months, and is now far worse than it was at the height of the financial crisis," Barclays analysts led by Paul Horsnell said in the bank's weekly oil data review.
Fitch rating agency's downgrade of Portugal added to worries about debt levels and growth in the euro zone's smaller countries.
Faster-than-expected growth of Chinese oil demand may compensate for Europe's weakness, Barclays said, citing JODI figures showing consumption by the world's second-largest oil user increased 2.1 million bpd in January from a year earlier.
Reuters