REUTERS:
OIL PRICES slid almost five per cent yesterday as U.S. crude oil supplies grew on the third highest weekly import level on record.
U.S. light crude dropped $2.59, to $51.61 a barrel, about 11 per cent below the all-time high of $58.28 struck earlier this month. London's Brent crude dropped $1.85 to $52.29 a barrel.
Prices plunged after the U.S. Energy Information Administration (EIA) said U.S. crude stocks rose 5.5 million
barrels last week to 324.4 million, the tenth increase in the last 11 weeks.
Crude imports poured in at 10.9 million barrels a day, pushing U.S. commercial crude stocks to their highest level since May 2002.
"If you ramp up crude imports to this degree ... you're going to get a crude build, it's pretty straightforward. The build is unambiguously bearish, there are no ifs, ands, or buts about it," said Jan Stuart, analyst at Fimat USA bank.
The big crude build outweighed the impact of a small fall in gasoline stocks and a surprise drop in distillate inventories, including diesel fuel, as refineries struggle to keep up with continued demand growth.
President George W. Bush yesterday proposed new oil refineries be built at closed military bases and adding vehicles that use diesel fuel to the list of automobiles eligible for $2.5 billion in tax credits over 10 years.
"I will direct federal agencies to work with states to encourage the building of new refineries on closed military facilities, for example, and to simplify the permitting process for such construction," Bush said.
Some analysts believe high oil and commodity prices are starting to slow world economic growth by fueling inflation and prompting a rising trend in global interest rates.
China's demand surge, which has shocked world market in the last year, is showing signs of slowing, and while U.S. economic growth remains solid there is concern over high trade and budget deficits.
The U.S. Commerce Department said yesterday that new orders for long-lasting U.S.-made goods slid by 2.8 per cent in March, the biggest drop since September 2002, as orders for aircraft fell sharply.
The report, which came on the heels of recent weak consumer data, offered a generally gloomy picture for factory and business spending plans.
OPEC producing countries, especially top world exporter Saudi Arabia, have raised production in an effort to build a stock buffer for an expected end-year surge in demand.
Saudi Arabia is expected to provide most of a 500,000 barrels per day (bpd) increase that OPEC President Sheikh Ahmad al-Fahd al-Sabah has said the cartel will make to supplies next month.
Adel al-Jubeir, foreign affairs adviser to Saudi Arabia's Crown Prince Abdullah said Riyadh could tap spare output capacity of 1.3 million to 1.4 million bpd, in addition to its current production of slightly over 9.5 million bpd.
