Oil falls to $70 as stock markets weaken

OIL PRICE: Oil fell on Wednesday as stock markets weakened around the world. (Getty Images)

Oil eased to around $70 a barrel on Wednesday pressured by weaker stock markets as investors awaited a US inventory report expected to show supplies declined in the world's top consumer.

European shares slid for a fourth day as some investors unwound trades which had bet on a speedy economic recovery. Late on Tuesday, the American Petroleum Institute released inventory data that was largely bearish.

"The stock market being down is a good reason for oil falling," said Christopher Bellew, a broker at Bache Commodities. "Essentially, we are still in the same range between $69.50 and $72.50."

US crude for July eased 40 cents to $70.07 a barrel by 2.32pm UAE time, having settled 15 cents lower at $70.47 on Tuesday. Brent crude for August slipped 18 cents to $70.06.

The US Energy Information Administration releases its weekly oil supply report at 6.30pm UAE time. The API data late on Tuesday showed a smaller than expected rise in crude stocks and a surprise increase in gasoline.

"Maybe the pattern of falling crude stocks in the statistics, if it's continued this afternoon, will hold us in that range rather than breaking back to the downside," Bellew said.

Analysts polled by Reuters expect crude supplies to fall 1.7 million barrels and gasoline inventories to decline by 100,000 barrels. The API reported crude stocks fell 1.3 million barrels and gasoline rose by 2.1 million barrels.

Oil traders consider the EIA report to provide a more complete snapshot of supplies because companies are required to respond to its weekly survey.

Some support for oil came from a weak dollar, which resumed its decline against other currencies on Wednesday. A weaker dollar can boost investor demand for oil and commodities.

Oil hit a 2009 high above $73 last week, lifted by expectations of economic recovery that would increase fuel demand. Prices are still far below the record high above $147 reached last year.

President Barack Obama will unveil on Wednesday plans for sweeping reform of US financial regulation, aimed at averting future crises like the banking meltdown that has plunged the global economy into recession. (Reuters)

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