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Oil lower on signs of weaker demand

In Uncategorized on March 24, 2010 at 3:48 pm

SINGAPORE, March 24, 2010 (AFP) – Oil prices fell in Asian trade Wednesday after nearing 82 dollars as a private report showing weaker US energy demand dampened sentiment, analysts said.

New York’s main contract, light sweet crude for May delivery, dropped 71 cents to 81.20 dollars a barrel.

Brent North Sea crude for May was down 60 cents to 80.10 dollars.

The American Petroleum Institute, an industry group, said late Tuesday crude stocks in the country, the world’s largest energy consumer, rose by 7.5 million barrels for the week ended March 19.

Analysts polled by Platts had forecast an increase of 1.67 million barrels.

“The increase was much larger than expected so it was slightly bearish. I think the market is readying itself for similar numbers (later),” said Serene Lim, a Singapore-based oil analyst with ANZ bank.

The US Department of Energy (DoE) will release its weekly inventory report later Wednesday. Most analysts expect the data to show an increase in crude oil stocks of 1.4 million barrels.

An increase in stockpiles indicates weaker demand.

A firmer US dollar in recent days has also kept oil prices down as uncertainty over a European plan to ease Greece’s debt crisis weighed on the euro, Lim said.

“The correlation between oil and the dollar has strengthened over the past few weeks and I think that’s also putting some pressure on oil prices,” she added.

As oil is traded in dollars, a stronger US currency makes the commodity more expensive to holders of weaker units and tends to dampen demand, leading to lower prices.

Oil prices had advanced to near 82 dollars a barrel Tuesday, lifted by gains in the US stock markets after a report from the National Association of Realtors showed existing-home sales fell lesser than expected in February.

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