Oil price drops to $80

Oil prices slid below $80 a barrel Wednesday in Asia after a report showed an unexpected jump in U.S. inventories of distillates and gasoline.

Benchmark crude for February delivery was down 89 cents to $79.90 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. On Monday, the contract fell $1.73 to settle at $80.79.

Oil prices rose to a 15-month high near $84 a barrel earlier this week amid expectations a spell of bitter cold in parts of the U.S., Europe and Asia would boost demand for oil distillates such as heating oil.

But data released late Tuesday by the American Petroleum Institute showed distillate inventories increased 3.6 million barrels last week, while analysts had expected a drop of 1.7 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Gasoline supplies jumped 6.8 million barrels and crude stocks rose 1.2 million, the API said. The Energy Department’s Energy Information Administration plans to announce its inventory report later Wednesday.

China’s decision Tuesday to raise the proportion of deposits that banks must hold in reserve also weighed on crude prices. China’s growing economy and oil demand has helped prices jump from $32 a barrel in December 2008, and a tighter monetary policy could signal slower growth.

In other Nymex trading in February contracts, heating oil fell 3.25 cents to $2.10 a gallon and gasoline dropped 3.38 cents to $2.06 a gallon. Natural gas futures skidded 2.7 cents to $5.56.

In London, Brent crude for February delivery fell 71 cents to $78.59 a barrel on the ICE Futures exchange.

Source: AP