New York - The price of oil dropped more than two percent on Wednesday, following disappointing economic news from the world's two biggest oil-consuming nations and a large increase in US crude supplies.
Benchmark oil for June delivery fell $2.43, or 2.6 percent, to finish at $91.03 a barrel on the New York Mercantile Exchange.
Data from China and the US pointed to weaker demand for oil. The manufacturing sector in both countries grew at a slower pace in April, according to data from industry groups. Construction spending in the US also fell. And payroll processor ADP said that private employers in the US added just 119 000 jobs last month, below analyst estimates.
While the market was digesting the economic news, the Energy Department said US crude inventories expanded by 6.7 million barrels last week, nearly five times the increase analysts expected. At 395.3 million barrels, supplies are the highest since 1982, when the government began tracking inventories. The nation's oil production, at 7.3 million barrels per day, is the highest it's been in 20 years. Imports of foreign crude increased last week, adding to bulging supplies.
Oil has dropped $3.47 a barrel, or 3.7 percent in two days, after gaining $5 last week. Analysts doubted whether economic conditions supported higher priced and “broad-based macro concerns were reinforced by disappointing manufacturing data out of both the US and China” on Wednesday, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.
Late in the trading session, the Federal Reserve said it will maintain its plan to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent. Oil inched back above $91 after the Fed issued its latest policy update. It was as low as $90.11 at one point in the trading session.
Loose monetary policies can boost oil prices because higher growth translates into added oil demand and because ample money supply weakens the dollar and makes crude cheaper for traders using other currencies.
Brent crude, which is used to set prices of oil from the North Sea used by many US refiners, dropped $2.42, or 2.4 percent, to end at $99.95 per barrel on the ICE Futures exchange in London. - Sapa-AP