March 6, 2013 / 6:52 PM / in 5 years

UPDATE 7-Oil falls to $111/bbl on U.S. inventory build

* U.S. crude oil inventory rise exceeds forecast - EIA

* U.S. dollar up against foreign currencies, pressuring oil

* U.S. refinery utilization down on plant maintenance

* After Chavez, Venezuela oil industry operates normally (Updates with settlement)

By Joshua Schneyer

NEW YORK, March 6 (Reuters) - Crude oil futures edged down to $111 a barrel on Wednesday after U.S. government data showed domestic crude inventories rose much more than forecast.

U.S. crude stocks rose by 3.83 million barrels in the week to March 1, the Energy Information Administration said in its weekly report. Analysts had forecast a 500,000-barrel build.

Inventories rose as refinery utilization fell during winter plant maintenance season and in spite of a drop in imports to the world’s biggest oil consumer.

“This is all definitely putting some pressure on (crude oil) in the short term. The refinery runs right now are down and the build in inventories is rising,” said Phil Flynn of Price Futures Group in Chicago. “The crude market hasn’t bottomed yet.”

Brent crude oil futures fell 55 cents to settle at $111.06 per barrel after trading between $110.46 and $112.23. U.S. light crude oil closed 39 cents lower at $90.43 after ranging between $89.55 and $91.17.

Another factor weighing on oil was a firmer U.S. dollar, which gained 0.5 percent against a basket of foreign currencies , making the greenback-denominated commodity more expensive for non-U.S. buyers.


Some losses in crude were pared as the Dow hit another record high on signs of improvement in the U.S. labor market.

Private U.S. employers added more jobs than expected in February, according to a report from a payrolls processor.

Meanwhile, U.S. Commerce Department data showed that January factory orders declined 2 percent, or a little less than a 2.2 percent consensus estimate by analysts in a Reuters poll. Contributing to the fall was weaker demand for transportation equipment.

Oil traders also watched developments in Venezuela, following the death of President Hugo Chavez on Tuesday after a two-year battle with cancer.

Venezuelan authorities promised to hold a new presidential election within 30 days, as stipulated by the constitution, but set no firm date.

The country’s oil industry was operating normally and no disruption was expected, state oil company PDVSA said.

“Chavez’s death will probably generate near-term, understandable but most likely misplaced, concerns that instability during the transition could threaten (oil) supply,” said Robert McNally, an energy consultant and former U.S. White House energy adviser.

“Medium term it may create hopes that better management of the oil sector could reverse Venezuela’s trend decline,” McNally added. (Additional reporting by Sabina Zawadzki and Dasha Afanasieva; Editing by Bob Burgdorfer and Peter Galloway)

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