Crude futures fell slightly on Wednesday after a report showed U.S. crude inventories rose more than analysts expected the week ended May 2.
U.S. crude oil inventories jumped by 5.7 million barrels from the previous week to 325.6 million barrels the Energy Department reported on Wednesday. Gasoline inventories increased by 0.4 percent to 211.9 million barrels and distillate fuel inventories fell by 0.1 million barrels.
The report showed the U.S. market is well supplied and signals the economy of the top consumer of oil in the world may start to gain strength, analysts commented.
Forecasts said crude oil inventories would rise by 1.5 million barrels last week and gasoline stocks would fall by 500,000 barrels according to a survey made by Platts. In a separate source forecast distillate stocks including heating oil and diesel were expected to decrease by 100,000 barrels.
Crude Futures for June delivery slightly fell 11 cents or 0.09 percent to $121.73 a barrel on the New York Mercantile Exchange on Wednesday. Prices are 98 percent higher than last year as they hit an all time record trading at $122.73 a barrel on Tuesday on fears of short supplies.
Royal Dutch Shell Plc said a militant attack last weekend damaged a pump station in Nigeria and production was cut. Recent bombing attacks in the African rich oil region total a disruption of tens of thousands of barrels per day.
Nigeria is Africa's top oil producer and the country is a strong supplier to the United States.
Analyst Arjun N. Murti along with more specialists at Goldman Sachs, released a report saying prices of crude could rise by $150 to $200 a barrel within two years on concerns of supply shortfalls.
Meanwhile investors keep an eye on emerging economies like China and India and are expecting demand will become stronger from both countries. The International Energy Agency advisor of 27 industrialized nations said on April Chinese oil demand will climb 4.7 percent to 7.89 million barrels a day in 2008 while global demand will grow 1.5 percent to 87.23 million barrels a day.
Brent crude for delivery in three months rose 76 cents or 0.64 percent to $120.16 a barrel on the London ICE Futures Exchange today.