u.s. oil stumbles below $37 ahead of data
SINGAPORE (Reuters) - U.S. oil prices stumbled below $37 a barrel on Wednesday, to mark a 13-percent drop from 21-year highs, ahead of U.S. data expected to ease worries of a summer supply crunch in the world's biggest energy consumer.
The U.S. government is expected to report later on Wednesday that oil stocks expanded last week more than five million barrels, as the country's refineries ramped up production to meet summer demand for gasoline.
However, oil dealers said there were still concerns about potential supply disruption, highlighted on Tuesday by news Iraq's northern export pipeline was shut down owing to sabotage.
U.S. light crude futures fell as low a $36.75 per barrel, well below last week's two-decade high of $42.45, the highest price since the New York Mercantile Exchange launched crude trading in 1983.
The most-active July contract was down 43 cents, or 1.15 percent, at $36.85 at 1:37 a.m. EDT. The decline extended Tuesday's 3.6 percent fall.
Oil dealers said selling by fund managers was driving prices lower, although they expected the downside to be limited by worries that militants are targeting key oil infrastructure in major Middle East producers such as Iraq and Saudi Arabia.
"Funds are in long-liquidation mode," a Tokyo-based trader said. "High volatility is expected."
Analysts forecast the U.S. data would show crude and distillates stocks each increased by 1.6 million barrels last week.
Gasoline stocks, which were close to four million barrels below a year earlier in last week's data, were seen up two million barrels.
SUPPLY FEARS
Oil dealers watch the gasoline data closely for clues on how well prepared U.S. refineries are to meet gasoline demand in the summer, when Americans take to the roads for vacations.
The data follows an agreement last week from the Organization of the Petroleum Exporting Countries (OPEC) to raise official production by two million barrels per day to 25.5 million bpd from July and a further 500,000 bpd from August.
The agreement would bring the official production ceiling into line with actual output. But OPEC members Saudi Arabia and the United Arab Emirates have promised to pump an additional one million bpd of crude regardless of the OPEC agreement to cool the market.
Prices weakened on Tuesday despite news that sabotage attacks had halted the flow of oil through Iraq's Kirkuk oil pipeline, running to an export terminal in Turkey, since May 31.
Kirkuk sales had raised Iraq's exports to two million bpd but the exports will now drop to 1.65 million bpd, all through the country's southern Basra oil terminal.
Fears are growing that oil shipments from OPEC member Nigeria could be disrupted after a powerful umbrella union in the world's seventh-biggest oil exporter called for a general strike on Wednesday in protest against a rise in domestic fuel prices.
Unions say a prolonged strike would affect all sectors of the economy, including oil exports, which generate 90 percent of the country's foreign exchange earnings.
