Oil prices down 3% on inventory concerns

4 June 2009

Crude oil prices fell back from seven-month highs on Wednesday as analysts warned that market fundamentals remain weak, despite the recent rally.

US crude for July delivery closed at $66.12 (£40.50) a barrel, down $2.43 on the previous day, while London Brent crude also fell by more than $2 to settle at $65.88 a barrel.

The losses came on the back of a report by the US Energy Information Administration which showed that crude inventories in the world's largest consumer country rose by 2.9 million barrels last week.

Stockpiles remain well above average for this time of year as the economic crisis continues to restrict oil demand and the news prompted some analysts to suggest the recent price rally could be over.

Tom Bentz, analyst at BNP Paribas, told Dow Jones Newswires: "The recent spike in the oil price had little to do with oil fundamentals. What goes up must go down. It can't go up for nothing."

This could be good news for home heating oil customers, who saw prices rise by around 30 per cent in May alone as the market recovered from lows of close to $32 a barrel towards the end of last year.

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