(Reuters) - Oil fell more than $1 on Wednesday, with the U.S.
benchmark dropping to a more than 6-month low, as a
larger-than-expected rise in crude stocks in the United States and
fears of Greece's exit from the
muddied the outlook for demand growth.
Investors are worried about the demand for oil as a prolonged
political crisis in Greece may push Europe into a deeper financial
mess at a time when
is slowing and the U.S. economy remains fragile. Yet, limited spare
capacity and fears of a supply disruption have put a floor under
slipped $1.39 to as low as $110.85 a barrel by 2:42 a.m. EDT,
declining for four out of the past five sessions. U.S. oil fell
$1.68 a barrel to $92.30 after earlier slipping to $92.13, the
lowest since November 3.
"A further $2-$3 fall is acceptable under current conditions,"
said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax
Investments. "The market has been under pressure because of weak
sentiment. But if you go by supply-demand balance, oil prices are
Oil may recover as the seasonally weak demand period ends and as
the U.S. driving season begins, Emori said. He expects supplies to
tighten because producer group OPEC and top exporters such as
have very limited spare capacity as they have already ramped up
output to cool prices.
But for now, a steep increase in crude stocks in the world's top
consumer, United States, a slow but steady progress in talks with
Iran over the Islamic Republic's disputed nuclear program and
are weighing on prices.
stocks increased nearly four times than what analysts had expected,
data from the American Petroleum Institute (
) showed. Crude inventories rose 6.57 million barrels in the week
to May 11, outpacing analysts' expectations of a rise of 1.7
The U.S. Energy Information Administration will release its weekly
petroleum inventory data at 1430 GMT.
Adding to worries about demand, Greece abandoned a nine-day hunt
for a government and called a new election, pushing it closer to
bankruptcy and a euro zone exit.
and the U.N. nuclear watchdog ended two days of talks by agreeing
to meet again next week, just two days before Tehran resumes
negotiations with world powers concerned it may be seeking to
develop atomic bomb capability.
"Certainly, if progress is made in Baghdad, a military option
will be even more remote in 2012," Barclays Capital analysts said
in a note, referring to a scheduled meeting between the UN Security
Council and Iran next week.
"However, there is a risk that because expectations of a
breakthrough have risen, if the negotiations stall or are judged a
failure, the calls for military action will mount and Iran will
again take center stage as a key upside risk in the oil
Brent remains neutral above a support at $110.34 per barrel, the
May 7 low, while support for U.S. oil lies at $92.79 per barrel,
according to Reuters technical analyst Wang Tao.
(Additional reporting by Florence Tan; Editing by Himani
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