September 28, 2011 / 3:35 AM / 8 years ago

Brent crude sinks under Greek debt weight

NEW YORK (Reuters) - Brent crude resumed its downward trend on Wednesday, falling 3 percent as Europe’s debt crisis continued to worry markets, while a larger-than-expected build in weekly U.S. crude oil inventories also weighed.

A driver pumps petrol into his car at a petrol station in Brussels March 8, 2011. REUTERS/Yves Herman

Doubts about whether Greece would get more aid to bolster its troubled economy shifted investor sentiment away from riskier assets like crude, a day after oil posted gains for the first time in five sessions.

“There has been widespread liquidation across the grains, metals and oil markets ahead of the German Bundestag lower house of parliament vote on Thursday on whether to back new powers for the euro zone’s rescue fund,” said Phillip Streible, analyst at MF Global in Chicago.

Risk aversion toward the end of the month and ahead of the two-day Rosh Hashana holiday beginning on Wednesday night also contributed to losses, traders said.

Brent futures dropped $3.33 to settle at $103.81 a barrel, wiping out Tuesday’s gains. U.S. crude fell $3.24 to settle at $81.21.

Weekly data from the United States’s Energy Information Administration (EIA) showed a 1.9 million barrel increase in crude oil inventories, higher than the 800,000 rise expected by a poll of analysts.

Wall Street fell ahead of an audit of Greece’s finances to decide whether the nation gets more aid to avoid bankruptcy. Eyes are on Germany to see if it will agree to a bailout.

The euro rose for the fourth straight day against the dollar. .N

In post settlement trade, 433,959 U.S. contracts were traded, 33 percent below the 30-day moving average. Brent volumes topped the 30-day moving average by 1.2 percent, hitting 526,689.

U.S. INVENTORIES

The market digested an increase in weekly U.S. crude oil inventories

“The (EIA) report was bearish. Most notable is the decline in refined product demand across the board. It speaks to the state of the economy and calls further into question demand estimates for the balance of the year and 2012,” said John Kilduff from Again Capital LLC in New York.

Gasoline stocks rose 791,000 barrels. Average gasoline demand in the last four weeks dropped 2.4 percent from year-ago levels, EIA said.

Distillates, which include heating oil and diesel, rose 72,000 barrels.

Oil prices will weaken only slightly and hover above $100 a barrel next year, despite fears of a global economic recession and a steep fall in demand, the latest Reuters poll showed.

EYES ON LIBYA, FRANCE

Benghazi-based oil firm Agoco said on Wednesday it is planning restarts at three more Libyan oil fields in east and west Libya by mid-October, boosting output to 350,000 barrels per day (bpd).

The return of supply of Libyan crude oil, which pumped 1.6 million barrels per day before a conflict which toppled the Gaddafi regime, is seen as bearish for the oil price.

Traders were also keeping an eye on potential strike action in French refineries.

Workers at French refineries debated going on strike, torn on Wednesday between anger over moves to restructure the sector and memories of last year’s month-long stoppage that disrupted global flows of oil but left unions drained and divided.

Additional reporting by Gene Ramos, Robert Gibbons, Eileen Moustakis and Janet McGurty in New York and Simon Falush, Francis Kan and Zaida Espana in London; Editing by Marguerita Choy

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