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Oil drops toward $91 ahead of data, economic worries

SINGAPORE - Oil fell toward $91 on Wednesday, extending the previous day’s over-$2 plunge, as the market awaited a slate of oil industry data that could show more signs of a possible US recession and weakening global demand.

US light crude for February delivery dropped by 55 cents to $91.35 a barrel by 0638 GMT, having shed $2.30 on Tuesday on a surprise fall in US retail sales in December and a record quarterly loss at the largest US bank Citigroup Inc

February London Brent crude which expires later on Wednesday, lost 42 cents to $90.56 a barrel.

“I don’t see any bullish factor in the short term but stocks data and the IEA report are important data and this should be an important week. This time the IEA might be forced to cut because of the economic turmoil,” said Tetsu Emori of Japan’s Astmax Futures Co Ltd.

Industry analysts expect US crude inventories to have risen last week for the first time in nine weeks, calling for a 600,000-barrel rise as imports recovered

Distillates would increase by 1 million barrels, and gasoline by 2.5 million barrels, a Reuters poll showed.

Traders will also watch for the International Energy Agency’s (IEA) monthly report to be released later in the day.

The IEA, adviser to 27 industrialised countries, last month raised its global demand forecast for 2008 by 200,000 barrels per day (bpd) to 2.1 million bpd.

But some now expect the organisation to cut its forecast in light of the latest US economic data, which would send a bearish signal to the market.

US oil prices are down more than 8 percent from their all-time peak of $100.09, hit earlier this month, as concern about a US economic slowdown has outweighed tightening stockpile levels in major consumer nations.

Oil was also affected on Tuesday when Saudi Arabia’s oil minister, Ali al-Naimi, said the world’s top exporter would raise output when the market needed more crude, responding to a US call for more supply.

US President George W. Bush, on a tour of the Middle East, earlier urged the kingdom to help tame soaring oil prices which threaten the US economy, saying exporters should help get more crude into the market.