Oil near $85 after mixed US crude supply report

By ALEX KENNEDY - Associated Press | AP – 1 hr 44 mins ago

SINGAPORE (AP) — Oil prices fell slightly to near $85 a barrel Wednesday in Asia after a U.S. supply report gave mixed signs about demand for crude.

Benchmark oil for October delivery was down 36 cents to $85.08 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. Crude rose $1.02 to finish at $85.44 on Tuesday.

In London, Brent crude for October delivery was down 11 cents to $109.20 on the ICE Futures exchange.

The American Petroleum Institute said late Tuesday that crude inventories fell 3.3 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 2.0 million barrels.

However, inventories of gasoline jumped 6.4 million barrels last week while distillates rose 2.0 million barrels, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.

Investors are closely watching economic and oil data for evidence about the strength of U.S. crude demand. Prices have fallen from near $115 in May amid growing speculation that the U.S. economy could contract soon.

"The market has gone through a shift with the emergence of talk of double dip recession," BNP Paribas said in a report.

The bank said it lowered its average crude price forecast — to $92 for the third quarter and $98 in the fourth — but still expects prices to rise from current levels because of expected U.S. dollar weakness and low interest rates.

Traders are also eyeing ongoing fighting in Libya's capital Tripoli between rebels and supporters of Moammar Gadhafi. Rebels stormed Gadhafi's compound Tuesday, but the leader and his sons were still at large.

Fighting since February has cut the OPEC nation's crude output to 60,000 barrels a day from 1.5 million, and analysts expect the overthrow of Gadhafi's 42-year regime would allow oil production to return gradually to pre-war levels.

In other Nymex trading for October contracts, heating oil rose 0.3 cent to $2.95 per gallon and gasoline futures fell 0.8 cent to $2.74 per gallon. Natural gas for September delivery added 0.4 cent to $4.00 per 1,000 cubic feet.

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