Oil falls below US$106 in Asia as report shows US crude supplies grew more than expected

Wednesday, Feb 22, 2012 12:01 am | Alex Kennedy, The Associated Press

An oil pump works at sunset Tuesday, Feb. 21, 2012, in the desert oil fields of Sakhir, Bahrain. (AP Photo/Hasan Jamali)

SINGAPORE - (TSX:ECA), (TSX:IMO), (TSX:SU), (TSX:HSE), (NYSE:BP), (NYSE:COP), (NYSE:XOM), (NYSE:CVX), (TSX:CNQ), (TSX:TLM), (TSX:COS.UN), (TSX:CVE)

Oil slid from a nine-month high to below US$106 a barrel Thursday in Asia after a report showed U.S. crude supplies grew more than expected last week, suggesting demand remains sluggish.

Benchmark crude for April delivery was down 38 cents to $105.90 per barrel midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 3 cents to settle at $106.28, the highest since May, in New York on Wednesday. Brent crude was down 20 cents at $122.70 per barrel in London.

The American Petroleum Institute said late Wednesday that crude inventories rose 3.6 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 1.7 million barrels.

Inventories of gasoline added 314,000 barrels last week while distillates rose 630,000 barrels, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later Thursday.

Crude has soared from $75 in October, raising concern that higher gasoline prices may stymie consumer spending and an improving U.S. economy. Analysts fear mounting tension over Iran's nuclear program could lead to a disruption of global crude supplies and trigger a jump in prices.

"Oil prices are still below the levels that would represent a serious threat to the global economic recovery," Capital Economics said in a report. "Of course, oil prices could surge if Iran tensions escalate and this would be a game-changer. Brent might spike as high as $210 in a worst case scenario involving the closure of the (Persian Gulf's) Strait of Hormuz."

In other energy trading, heating oil rose 0.2 cent to $3.27 per gallon and gasoline futures slid 0.5 cent to $3.26 per gallon. Natural gas added 0.6 cent to $2.65 per 1,000 cubic feet.

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