Oil falls to around $97 amid US supply jump

Updated on Jul 28, 2011 11:36 AM IST

Oil prices fell to near $97 a barrel today in Asia as the release of US emergency crude reserves boosted commercial inventories.

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AP | By, Singapore

Oil prices fell to near $97 a barrel Thursday in Asia as the release of US emergency crude reserves boosted commercial inventories.

Benchmark oil for September delivery was down 25 cents to $97.15 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude lost $2.19 to settle at $97.40 on Wednesday.

In London, Brent crude dropped 2 cents to $117.41 per barrel on the ICE Futures exchange.

The Energy Department's Energy Information Administration said Wednesday that US commercial oil supplies grew by 2.3 million barrels last week, roughly the amount the US released from its Strategic Petroleum Reserve.

Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 2.3 million barrels.

The International Energy Agency said last month it would release 60 million barrels, half from the US in a bid to lower prices and make up for the shut down of Libyan oil since civil conflict began the OPEC nation in February. The US will eventually release 30 million barrels from the strategic reserve as part of that.

Failure by US leaders to agree to lift the government's debt limit also weighed on crude prices. While most analysts expect a last-minute deal will be struck, uncertainty ahead of the Aug. 2 deadline has begun to spook markets.

The Dow Jones industrial index dropped 1.6% Wednesday and most Asian stock markets fell Friday.

"Few believe that the crisis will continue without some resolution before August 2, but it is now starting to look increasingly likely that the US credit rating will be lowered," energy analyst Cameron Hanover said in a report.

"Equities could drop even more urgently if this crisis is not resolved soon. It would be especially bad to let it fester over the weekend."

In other Nymex (New York Mercantile Exchange) trading in September contracts, heating oil gained 1.3 cent at $3.11 a gallon while gasoline advanced 1.7 cents at $3.10 a gallon. Natural gas futures rose 0.4 cent at $4.32 per 1,000 cubic feet.

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