Oil prices drop despite fall in US stockpiles

World oil prices slid Wednesday despite a fall in stockpiles of US crude, with analysts saying the figures did not point to a pick-up in energy demand in top consumer the United States. New York's main contract, light sweet crude for delivery in July, lost 90 cents to $98.47 a barrel. Brent North Sea crude for July shed $1.91 to $118.25 in late London deals. Losses for Brent were exaggerated by profit-taking on the contract's last trading day. The US Department of Energy (DoE) said crude stockpiles slumped 3.4 million barrels last week, six times greater than expected by analysts. Rather than a spike in demand, the drop was largely due to supply disruption, redit Agricole analyst Christophe Barret said. "DoE weekly statistics showed a relatively large drop in crude stocks for the second consecutive week, likely to reflect disruption in Canadian crude supplies," he said. On Tuesday, the American Petroleum Institute forecast a three-million-barrel decrease in crude oil inventories for the week ending June 10, double initial predictions and a sign that demand was picking up. Oil prices rallied on Tuesday in nervous trade, with New York crude closing up two dollars as the market welcomed encouraging US economic data. John Kilduff of Again Capital had suggested that Tuesday's rises had been a technical rebound after two down days. Goldman Sachs meanwhile warned in a market analysis that the bigger picture is rising demand forcing a tightening of supply. "With world economic growth continuing to drive oil demand growth well in excess of non-OPEC production growth, the oil market continues to draw on inventories and OPEC spare capacity in order to balance," Goldman analysts said. "In our view, it is only a matter of time until inventories and OPEC spare capacity will become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supplies," they added. Official data this week showed industrial output from China, the world's largest energy consumer, rose sharply in May. Sustained growth in the Chinese industrial sector would translate to strong crude demand as the Asian economic powerhouse seeks energy to fuel its thousands of workshops and factories.