Oil Tumbles Below $92 as Supply Fears Ease

Oil prices tumbled more than 3 percent to below $92 a barrel after a U.S. government report showed crude stockpiles fell less than expected last week, easing supply concerns.

The fall extended losses that have chopped $7 off oil prices since Friday on expectations that the Organization of Petroleum Exporting Countries may increase output and signs U.S. demand growth is cracking due to wider economic problems.

Oil Refinery
Oil Refinery

U.S. light, sweet crude plunged, as did London Brent crude.

U.S. crude inventories fell 400,000 barrels last week, less than half of what analysts had expected, as imports offset higher demand from the nation's refineries, according to the U.S. Energy Information Administration.

Crude stockpiles in Cushing, Oklahoma, -- the delivery point for U.S. crude futures -- rose 600,000 barrels over the same period, according to the EIA.

Analysts said the report could alleviate some of the concerns about consumer supplies ahead of the winter, which had helped send oil to a record above $99 a barrel last week.

"Given that we have had so many bullish reports with (refinery) utilization lower and crude falling, this is the first sign that supplies may have a chance to increase," said Peter Beutel, president of Cameron Hanover.

"This puts additional pressure on markets that seem to have second thoughts on its ability to print $100 a barrel."

Oil prices have surged from below $70 a barrel in August to near $100 on a weaker U.S. dollar, a rush of speculative investment and worries that supplies might be stretched to meet
demand during the Northern Hemisphere winter.

But concerns about the faltering economy in the giant U.S. market and expectations OPEC may increase output when it meets next week in Abu Dhabi have helped send prices lower.

"It's difficult to buy oil when you know that the market is worrying about a recession in the world economy, especially in the United States," said Ken Hasegawa of Fimat Japan.

U.S. consumer confidence fell for a fourth straight month in November to a two-year low, dragged lower by concerns about financial markets and rising gasoline prices.

Top OPEC Gulf officials have expressed concern about oil's record run, but insist supplies are sufficient and do not support prices near $100.

"We observe with great concern the recent escalation of oil prices," Saudi Oil Minister Ali al-Naimi told a regional energy conference in Singapore.

"But we believe that the world market is well supplied and petroleum inventories are comfortable," he said, blaming a weak dollar, geopolitical tensions and speculators for the rise.

OPEC President Mohammed al-Hamli said high prices were a worry, but added the world economy had weathered the rising cost of energy so far.

Still, a Reuters poll of 21 banks, funds, consultants and traders showed a majority expecting OPEC to increase output by at least 500,000 barrels per day when its ministers meet
Dec. 5 in Abu Dhabi.