Oil below $51 on inventories

Weekly report shows 3.6M barrel gain in crude, well above analysts' expectations.
April 13, 2005: 11:10 AM EDT


NEW YORK (CNN/Money) - Crude oil fell to a seven-week low Wednesday, after a government report showed a rise in crude inventories and a build in gasoline stocks ahead of summer.

Oil prices tumbled on the news, the May contract for U.S. light crude fell $1.01 to $50.85 a barrel, after having slipped as low as $50.35.

London Brent was down $1.15 at $50.83.

Prices have fallen nearly 13 percent from last week's record high above $58.



The Energy Information Administration said crude oil inventories rose by 3.6 million barrels in the week ended April 8 from the previous week, much higher than the 450,000-barrel rise forecast by Briefing.com.

Over the last nine weeks, crude oil inventories, already at the highest level in nearly three years, have increased by 26.4 million barrels to 320.7 million barrels.

Total motor gasoline inventories rose by 800,000 barrels to 213.1 million last week, also surpassing analysts' expectations for levels to remain unchanged.

Distillate fuels, used for heating, posted a modest gain. The inventory rose by 100,000 barrels, the report said, but fell short of the 250,000-barrel rise forecast by analysts.

"The April IEA report supports our belief that rising inventories, moderating demand growth and Saudi Arabia's commitment to put more oil into the market will put downward pressure on oil prices," Merrill Lynch said in a report.

OPEC boost?
OPEC powerhouse Saudi Arabia added pressure to prices by telling oil majors and Asian refiners that it would boost their May crude oil supplies by 10 percent or more, effectively putting as much as 500,000 bpd of new oil on the market.

Middle East Gulf producers are eager to lift output now to encourage stock-building in the coming months, creating a buffer for strong demand later this year, although OPEC members Nigeria, Algeria and Venezuela have said more oil is unwarranted.

OPEC President Sheikh Ahmad al-Fahd al-Sabah said this week the group was on track to boost supplies by 500,000 bpd next month, pressing ahead with a second increase despite prices having slipped back below the cartel's $55 threshold.

The Organization of the Petroleum Exporting Countries raised output limits by 500,000 bpd in March to 27.5 million, leaving room for a second rise if oil prices remained high.

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