Oil slid to just above $65 a barrel today, after data showing an unexpected rise in US crude stocks underscored worries about persistently weak demand from the world's top energy consumer.
The release of more closely watched U.S. Energy Information Administration (EIA) data later in the day could confirm the American Petroluem Institute's (API) bearish figures, and will set the trading tone for the market.
“Sentiment has taken a knock from the API numbers, which have primed expectations for the EIA data later tonight, so if the EIA numbers show a similar trend, it's going to be pretty negative for oil,” said David Moore, a commodity strategist with the Commonwealth Bank of Australia.
US crude oil for September delivery fell 39 cents to $65.22 a barrel by 7.40am, off an early low of $64.75. London Brent crude for September fell 11 cents to $66.76.
US crude oil stockpiles rose unexpectedly last week as domestic refining activity slumped, the API said yesterday.
Commercial oil inventories jumped 3.1 million barrels to 349.883 million barrels, reversing a stretch of weekly declines triggered by thin import levels and defying analyst expectations for a 2.1-million barrel drop.
The EIA will unveil its report at 3.30pm.
However, data showing that apparent oil demand in the world's second-largest energy user rose for the third month in a row could help limit oil's losses.
China's implied oil demand in June rose 1.8 per cent over a year ago, Reuters calculations from official data showed today.
Lending further price support were firm equity markets and a weak dollar.
US equities ended higher yesterday, as a slew of rosy corporate earnings reports bolstered hopes for an economic recovery that could revive global energy demand.
Asian shares also inched up to a 10-month peak on Wednesday, but gains were limited as investors locked in profits in the belief that the run-up in prices had become overstretched.
The greenback was weighed down by Federal Reserve Chairman Ben Bernanke's remarks in his testimony before the House Financial Services Committee yesterday that the economy was too weak for the central bank to tighten monetary policy any time soon.
Reuters