Oil: Price falls from record as US stockpiles up

NEW YORK - Oil prices fell from record peaks on Tuesday as predictions of rising crude stockpiles in the United States countered worries over strong global demand growth.

US light crude CLc1 fell 97 cents to US$56.04 per barrel from Monday's US$58.28 all-time high. London's Brent crude LCOc1 fell 79 cents to US$55.44 a barrel from Monday's record of US$57.65 a barrel.

The losses came as dealers turned their attention to swelling US crude oil inventories, running at their highest level in nearly three years, according to the most recent government data.

Strong imports could spell continued increases to US inventories. Analysts polled by Reuters said they expected a report due Wednesday from the Department of Energy to show national stocks up another 2.2 million barrels last week.

High supply levels in the world's biggest energy consumer countered persistent concerns that rapid energy demand growth in Asia could outpace growth in supply. These worries have helped boost US crude prices about 30 per cent so far this year.

"Demand is expected to be a whopping 86.5 million barrels per day globally in the fourth quarter, raising fears over whether the global oil system will be able to cope with such massive levels," Washington DC-based analysts PFC Energy said in a report.

US Federal Reserve Chairman Alan Greenspan said on Tuesday that market forces could eventually lead to a big enough increase in crude oil inventories to cool the recent oil price "frenzy".

"If sustained, these market technicals could encourage enough of an inventory buffer to damp the current price frenzy," Greenspan told an energy conference.

Greenspan said higher oil prices have slowed oil demand growth, "but only modestly". The Fed chief also expressed concern about a lack of world crude oil refining capacity, calling it "worrisome".

Oil traders are closely watching US petrol supplies ahead of the summer peak demand season, which kicks off at the Memorial Day holiday at the end of May and stretches to the Labor Day weekend in September.

While US petrol supplies are also running at a surplus, strong demand and recent refinery problems have raised concerns about potential shortfalls.

Eleven analysts polled by Reuters predicted US petrol inventories would fall by an average 1.3 million barrels in this week's data due to healthy demand.

Crude's rally to recent peaks has piled pressure on the Opec producers' cartel to increase supplies to the global 84 million-barrel-per-day market.

Opec oil ministers have begun telephone consultations over a possible output rise of 500,000 bpd to cool prices, Opec President Sheikh Ahmad al-Fahd al-Sabah said on Monday.

The Organisation of the Petroleum Exporting Countries raised output limits by 500,000 bpd to 27.5 million bpd in mid-March and left room for a second increase before a June meeting if oil failed to ease below US$55.

The impact of Opec's move has been muted by concerns that higher supply from the cartel will leave less spare capacity to cope with supply problems. The low quality of Opec's crude also reduces its yield of prized transportation fuels.

"Opec recognizes the need to prepare for the fourth quarter, but are wary of putting out more heavy crude which will simply hurt differentials and their revenues without necessarily providing the barrels the market needs," PFC Energy said in a report.

Acting Secretary-General Adnan Shihab-Eldin said on Monday Opec, excluding Iraq, had lifted output by 300,000-500,000 bpd in March versus February.

- REUTERS