by FP Staff Apr 4, 2013 05:15 IST
SINGAPORE (Reuters) - Brent crude slipped toward $110 a barrel on Wednesday, dropping for a second straight day, as swelling oil inventories in the United States and recent weak data fuelled worries about demand from the world's top consumer.
U.S. oil prices suffered further pressure from concerns about a prolonged pipeline outage in the Midwest leading to a buildup in stockpiles near the delivery point of the benchmark contract in Cushing, Oklahoma.
Crude oil stocks in the United States rose 4.7 million barrels for the week ended March 29, according to data from industry group the American Petroleum Institute, much higher than the 2.2 million forecast by a Reuters poll.
Investors suggest the build in inventory reflects a weak economy that is still struggling to recover, and limiting oil demand growth.
"The U.S. economy took such a body blow three, four years ago with the financial crisis, it's like a patient that's been hit by a car, it's going to take a long while for it to recover," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
"And if the patient is in such shape, it is going to take time for us to start seeing demand actually growing to levels before the financial crisis."
Brent dropped 37 cents to $110.32 a barrel by 0419 GMT, after hitting a low of $110.16 earlier in the session. U.S crude slid 50 cents to $96.69 a barrel.
And a slew of recent weak economic data shows oil prices may face further headwinds.
Britain's manufacturing activity shrank for a second straight month, a survey showed on Tuesday, while U.S. factory activity grew at its slowest rate in three months in March, indicating a muddy outlook for oil demand.
Europe's demand for oil has also been hit by seasonal refinery maintenance, traders said.
"We could possibly see the backwardation on the Brent curve between May and June narrow further because there is a lot of crude now swashing around in Europe, with no refinery demand," Ritterbusch said.
The Brent-U.S. crude spread widened slightly to $13.63 a barrel from its settlement in the previous session.
Brent's premium to U.S. crude rose to a more than one-week high of $14.66 on Tuesday amid uncertainty surrounding the impact of the ruptured Exxon Mobil Pegasus pipeline in the U.S. Midwest.
Investors said the pipeline shutdown could potentially contribute about 300,000 to 400,000 barrels a week to crude inventories at Cushing.
"But the glut again in Cushing is reflective also of demand and the pipeline alone isn't going to drain off supply," Ritterbusch said.
Exxon said it was developing a plan to excavate, remove and replace the ruptured portion of the pipeline, while a U.S. pipeline agency said Exxon would need to test and submit a remedial work plan before it could resume operations.
Markets are now waiting for key U.S. jobs data later this week for clues to the health of the world's largest economy and indications on its appetite for oil.
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