NEW YORK - World oil prices slid nearly two dollars on Thursday in response to data showing high levels of US crude stocks and indications that demand in China and the United States is flagging.
New York's main contract, light sweet crude for delivery in June, slid 1.91 dollars to close at 48.54 dollars a barrel, just off a session low of 48.30 dollars and its lowest finish since February 18.
In London, the price of Brent North Sea crude oil for delivery in June slumped 1.73 dollars to 48.34 dollars a barrel.
"It's a hangover from the inventories and a little bit from the IEA," Refco analyst Marshall Steeves said.
New York futures had slumped by 1.62 dollars on Wednesday after the latest weekly snapshot from the US Department of Energy (DoE) showed increasing levels of US crude stockpiles.
That, along with a report by the International Energy Agency (IEA), eased fears of a supply crunch heading into the US summer holidays.
According to the IEA report Wednesday, demand for oil in the first quarter of this year slowed sharply in China and the United States, which were the main forces behind soaring demand in 2004.
"It's also technical. With crude opening below 50 dollars, which is an important psychological marker, that incited a lot of speculative selling," Steeves said.
The DoE said that crude oil inventories for the week ending May 6 had increased by 2.7 millions barrels to stand at 329.7 million, beating market forecasts of an increase of 1.5 million.
The department added that the stocks were at the highest weekly level since March 31, 2002 -- and the highest monthly level since July 16, 1999.
Reserves of gasoline rose by 200,000 barrels to 213.7 million, though below expectations of a one-million-barrel increase, the DoE added.
Gasoline, or petrol, was in focus with the onset of the US summer driving season. Many Americans take to the roads for holidays starting on the US Memorial Day holiday on May 30.
"It's simple, the reason why prices are going down is just that the US inventories are getting actually quite high now," Seymour Pierce analyst Richard Slape said.
"They haven't been that high since July 1999 so even allowing for the fact that demand has risen a lot since then, that it is still a fairly comfortable position to be in.
"Similarly gasoline inventories are also at their highest level for several years for this time of the year," Slape added.
Analysts at the Sucden brokerage firm noted that the rising stocks in the United States, the world's largest energy consumer, coincide with the IEA predictions of slowing economic and oil demand growth.
Demand in China grew 4.5 percent or 280,000 barrels per day, compared with 19.3 percent in the first quarter last year, according to the IEA, while the United States was up 1.2 percent compared with 1.7 percent.
Daniel Hynes, an energy analyst with ANZ Bank in Melbourne, said the IEA report and latest DoE stock inventory snapshot would keep prices below 50 dollars, at least in the short term.
"There seems to be a lot more downside risk in the price at the moment," Hynes said.
"It's been a struggle to push any higher than 52 dollars in the last couple of weeks."
05/12/2005 20:25 GMT