NEW YORK (Reuters) - Oil prices dipped on Wednesday, pressured by rising U.S. product inventories builds due to ongoing weak demand in the world’s top oil consumer.
The U.S. Federal Reserve’s decision to hold interest rates near zero also weighed on prices as it pulled the U.S. dollar higher and led Wall Street lower.
U.S. oil for March delivery settled at $73.67 a barrel, down $1.04, briefly dipping below the 200-day moving average of $73.66. Oil prices have fallen from above $83 a barrel on January 11.
In London, ICE Brent crude for March settled at $72.74 a barrel, down $1.05.
“Crude is being pressured by growing pessimism relative to the pace and sustainability of recovery. It’s affecting all the markets, commodities, stocks and debt,” said Mike Fitzpatrick, vice president at MF Global in New York.
Gasoline stocks rose more than expected in the week to January 22 by 2.0 million barrels to 229.4 million barrels, the U.S. Energy Information Administration reported Wednesday morning.
Distillate stockpiles, which include heating oil and diesel, unexpectedly rose 400,000 barrels to 157.5 million barrels, compared with a 1.7 million-barrel decline forecast by analysts.
Crude inventories had a surprise draw of 3.9 million barrels, which some analysts dismissed, citing weather-related import delays in the Gulf of Mexico.
“What is more important is product stocks are up, which indicates an awful demand situation,” said Tom Knight, a trader at Truman Arnold in Texarkana, Texas.
U.S. crude imports fell by 673,000 barrels per day to 7.87 million bpd, the EIA reported.
The U.S. dollar climbed to a six-month high against the euro on concerns over Greece’s fiscal health and after the U.S. Federal Reserve kept interest rates near zero.
A stronger dollar makes commodities priced in the U.S. currency more expensive for those holding other currencies.
U.S. stocks fell on Wednesday after the Fed said it will keep interest rates near zero and investors remained cautious before President Barack Obama’s State of the Union address Wednesday night. .N
Concerns that demand for oil in China will slow after the nation’s largest bank said it would slow credit growth also weighed on oil prices.
The Industrial and Commercial Bank of China said it had stopped rolling over some loans in order to slow credit growth after a surge at the start of the year.
Analysts see the ICBC’s surprise loan curbs as prudent steps and conducive to sustainable growth.
“Commodities in general have been pressured by the Chinese finally putting some force to try and slow down their economy,” said Mike Zarembski, senior commodities analyst at optionsXpress in Chicago.
Lending curbs and steps by the central bank to mop up some of the cash sloshing around in the banking system have weighed on global investor sentiment.
In its mid-January report, the International Energy Agency pegged China’s 2009 oil demand growth at 572,000 barrels per day, a rise of 7.2 percent.
Additional reporting by Robert Gibbons and Gene Ramos in New York, Chris Baldwin in London, Alejandro Barbarosa in Singapore and Aizhu Chen in Beijing; Editing by Walter Bagley and Lisa Shumaker