Oil prices fell to near $96 a barrel Wednesday, extending a week-long slump, after a report showed U.S. crude supplies jumped more than expected last week, suggesting demand remains weak.
By early afternoon in Europe, benchmark oil for June delivery was down 81 cents to $96.20 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 93 cents to settle at $97.01 in New York on Tuesday.
In London, Brent crude was down 79 cents at $111.94 a barrel on the ICE Futures exchange.
The American Petroleum Institute said late Tuesday that crude inventories rose 7.8 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 2.2 million barrels.
Inventories of gasoline fell 5 million barrels last week while distillates tumbled 2.7 million barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data — the market benchmark — later Wednesday.
If the inventory build is confirmed by the EIA, it would be the seventh week in a row that U.S. crude stockpiles have expanded, taking supplies to their highest level since mid-1990, said analysts at Commerzbank in Frankfurt.
Crude has dropped from $106 last week amid signs the U.S. and European economies may expand less than previously expected this year. Despite the recent sharp pullback in oil prices, some analysts say crude still trades above the level supply and demand fundamentals would suggest.
"Over the past months, stockpiles around the globe have continued to grow as the world's largest producers (the U.S., Saudi Arabia and Russia) continue to pump at or near record levels," energy analyst Richard Soultanian of NUS Consulting said in a report. "The markets are extremely well supplied and demand, as a result of slow growth in the U.S., recession in Europe and slowing growth in Asia, remains tepid."
In other energy trading, heating oil was down 1.4 cents at $2.9761 per gallon and gasoline futures slid 0.39 cent to $2.9905 per gallon. Natural gas added 4.9 cents at $2.442 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.