Crude oil prices drop on higher US oil inventories

Crude oil futures fell sharply Wednesday as a government report showed a larger-than-expected increase in US crude inventories.

On the New York Mercantile Exchange, light, sweet oil futures for May delivery fell 2.22 dollars to end at 53.81 dollars a barrel. On London's International Petroleum Exchange, the May Brent crude-oil futures contract shed 1.55 dollars to settle at 53.04 dollars per barrel.

The Department of Energy reported Wednesday that US crude oil inventories rose by 4.1 million barrels last week to 309.3 million barrels, or 8 percent above year ago levels. The rise in US oil supplies coincided with evidence that the growth in oil demand in Asian region might be slowing.

Meanwhile, the Federal Reserve raised its short-term interest rates by 0.25 percent Tuesday. Rising interest rates, which could slow economic growth and energy demand, were seen as a factor that drove oil prices lower.

However, analysts were still divided over the short-term oil trends. Some said that supply fears over the past few months had resulted a "premium of at least 8 dollars to 9 dollars" a barrel over market fundamentals. But others believed that higher prices would be with the market for quite a long time because of the limited excess production capacity and the strong global demand.

While oil prices retreated, traders were confident that the era of high oil prices was not over.

Source: Xinhua