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Crude Oil Prices Slip on Greater Supplies

The unexpected pullback follows a report that U.S. inventories neared a three-month high.

March 04, 2004|From Bloomberg News

Crude oil prices pulled back from recent one-year highs Wednesday, after an Energy Department report showed that U.S. inventories rose close to a three-month high last week.

A move by Saudi Arabia to trim prices also helped to depress bullish sentiment.

U.S. supplies rose 2 million barrels to 275.8 million in the week ended Friday, the government said. Analysts surveyed by Bloomberg had expected a drop of 100,000 barrels, on average.

The report sent crude oil futures for April delivery down 86 cents, or 2.4%, to $35.80 a barrel on the New York Mercantile Exchange.

Oil had reached $36.86 a barrel Monday, the highest since the start of the Iraq war nearly one year ago, amid concerns about strong demand while inventories have declined.

Prices also fell Wednesday because of a report that Saudi Arabia, the world's largest oil exporter, would reduce the price of its shipments to the U.S. in April. The price for Saudi grades will decline by 20 cents to 40 cents a barrel compared with a benchmark U.S. grade, Reuters reported, citing market sources.

"Saudi Arabia was expected to announce an export cut and instead we got a price cut," said Ed Silliere, vice president of risk management for Energy Merchant in New York.

The Organization of the Petroleum Exporting Countries, which pumps about a third of the world's oil, agreed last month to trim production by 1.5 million barrels a day starting April 1. The cut was to prevent a second-quarter supply glut from depressing prices, the cartel said.

But OPEC President Purnomo Yusgiantoro said Monday that the group was ready to boost output if prices continued to rise. A United Arab Emirates official said OPEC could reverse its production-cut plan when it meets March 31 should oil prices remain high.

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