US Govt Surprised Traders With Report

Oil prices fell 3 per cent, reacting on a US government report about a surprise increase in fuel stockpiles last week in the US.

New York light sweet crude was down $1.52 to $44.24 a barrel after dropping to a low of $43.65, while London?s Brent futures fell $1.73 to $40.64 a barrel on the IPE.

The US Energy Information Administration said on Wednesday morning that inventories of crude oil, distillates and petrol all increased last week, thanks to strong imports and domestic refining activity.

Analysts had expected supplies to shrink as recent frigid weather in the Northeast boosted heating demand.

"This time of year you should see draws in distillates," said Bill O'Grady, analyst at A.G. Edwards. "We got no builds in heating oil, but all you have to do is keep heating oil steady for the next three or four weeks and you're out of the woods."

The EIA report said commercial crude stockpiles built by 2.1 million barrels to 295.9 million in the week to Dec. 17, more than 7 per cent above year-ago levels.

The EIA also said distillate fuel inventories rose 600,000 barrels to 119.9 million, narrowing the shortfall to year-ago stockpiles to about 12 per cent.