Oil plunges after rise in US crude stocks

Oil fell sharply on Wednesday after U.S. government data showed a rise in crude oil and gasoline stocks last week.

Prices had already dropped steeply in the previous session on expectations that a faltering economy in top energy consumer the United States would hit demand growth.

U.S. crude was $5.45 down at $133.29 a barrel by 1452 GMT. London Brent crude was $4.85 down at $133.90 a barrel.

U.S. crude oil stocks rose 3 million barrels last week, when analysts had predicted a fall of 2.1 million barrels..

Gasoline stocks rose 2.4 million barrels versus a forecast for a 400,000 barrel draw.

Distillates rose 3.2 million barrels, when analysts had predicted a rise of 2 million.

"Crude inventories are low right now so we're going to need to see some more building from crude for the market to get comfortable with the inventory level…$130 is going to be a key level," said Amanda Kurzendoerfer, analyst at Summit Energy.

Investors have pumped cash into oil and other commodities this year looking to hedge against inflation and the weak dollar, which has helped drive crude oil up about 50 percent from the start of this year to a record above $147 a barrel earlier in July.

The world's top oil exporter Saudi Arabia wants to see lower oil prices, Saudi King Abdullah said in an interview with an Italian newspaper.

"When the price of oil hovered around $100 a barrrel, we were already unhappy. Imagine what we feel now, when there is talk of $200," he said.

Oil's six-year rally has been driven partly by ballooning demand from developing economies such as China and India.

But consumers in large economies like the United States, already feeling the pinch of the credit crunch and housing crisis, have begun to scale back on energy use, with retail gasoline demand down more than 5 percent last week from a year ago, according to MasterCard Advisors. (Reuters)