Oil slips as US crude supplies rise

[July 22, 2009]  VIENNA (AP) -- Oil prices fell below $65 a barrel Wednesday after data showed a rise in U.S. crude inventories, a sign that consumer demand remains sluggish in the world's biggest economy.

Benchmark crude for September delivery was down $1.01 to $64.40 a barrel by noon European electronic trading on the New York Mercantile Exchange. On Tuesday, the August contract expired, rising 74 cents to settle at $64.72.

U.S. crude inventories rose 3.1 million barrels last week while gasoline supplies gained 1.3 million, the American Petroleum Institute said late Tuesday. Analysts expected the API numbers to fall 2.0 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Investors will be watching for inventory data from the Energy Department's Energy Information Administration on Wednesday for more signs crude demand may be waning. The API numbers are reported by refiners voluntarily while the EIA figures are mandatory.

Oil prices have risen from $58.78 a barrel two weeks ago on stronger than expected second quarter corporate earnings. Some of the improved company results have been the result of cost cutting such as layoffs, which in turn is dragging on consumer demand.

Federal Reserve Chairman Ben Bernanke said Tuesday that the economy is improving, but that any recovery will be slow due to rising unemployment.

"During the last week, markets have seen a significant upward trend with oil rising almost 9 percent and stock markets by some 7 percent," noted Vienna's JBC Energy. "Nevertheless in our view, this is a result of the temporary positive sentiment among financial markets rather than a substantial fundamental improvement in the US economy or oil markets."

Others also were cautious about the economy, and its effects on oil.

"The better profits is a good sign, but I want to see more macro numbers improve," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "High unemployment is still a problem going forward."

In other Nymex trading, gasoline for August delivery slipped by over 3 cents to $1.78 a gallon and heating oil dropped slightly to $1.68. Natural gas for August delivery was steady at $3.71 per 1,000 cubic feet.

In London, Brent prices fell 65 cents to $66.22 a barrel on the ICE Futures exchange.

[Associated Press; By GEORGE JAHN]

Associated Press writer Alex Kennedy contributed to this report from Singapore

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