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NEW YORK: Oil prices sank on Wednesday on news of an unexpectedly sharp jump in US crude reserves, signalled weaker demand in the world's largest energy consumer.
Slumping stock markets also weighed on oil prices as traders worried about falling demand in a cooling global economy.
New York's main contract, light sweet crude for delivery in November, fell 1.11 dollars to close at 88.95 dollars a barrel.
In London, Brent North Sea crude for November slipped 30 cents to settle at 84.366 dollars.
The US Department of Energy said Wednesday that US crude oil inventories rose by 8.1 million barrels in the week ended October 3, far more than market expectations of a 2.3-million-barrel gain.
Gasoline stockpiles rose by 7.2 million barrels instead of the 1.1 million expected.
Demand continued to weaken, the DoE said. Over the past four weeks, oil consumption averaged 18.7 million barrels per day, down 8.6 percent from a year ago.
Crude oil prices earlier had tumbled to 12-month lows as plunging stock markets stoked fears of slowing economic growth and in turn weaker global demand for energy, traders said.
The oil market also was dampened by falling equities, which sparked fresh fears about global energy demand, despite a coordinated move by six major central banks to slash their interest rates.
The US Federal Reserve, the European Central Bank, the Bank of England and peers in Canada, Sweden and Switzerland announced coordinated half-point cuts in key interest rates in an extraordinary bid to unblock gridlocked credit and calm market turbulence.
But some analysts voiced doubts the rate cuts would be enough to snap the markets out of their tailspin.
John Kilduff at MF Global said that oil had pressed its December 2007 lows near 86 dollars before the central bank intervention.
"It will take considerably more than today's events to rekindle consumer spending which is, after all, the core momentum behind falling oil prices," Kilduff said.
Prices had rallied on Tuesday on speculation about a possible reduction in crude oil production by OPEC and a coordinated global round of interest rate cuts to combat the ongoing worldwide banking crisis.
"It's all doom and gloom on the demand side," said Tony Nunan, a manager with Mitsubishi Corp's international petroleum business in Tokyo. "The economy looks like it's going to get worse before it gets better."
However, demand for oil, particularly heating fuels, traditionally hits a peak during the upcoming northern hemisphere winter months.
Oil prices first broke through the 100-dollar level at the start of the year and touched record highs above 147 dollars in July.
"The final run to 147 dollars, coincident with falling home prices, seemed to be the climactic event," MF Global's Kilduff said.
But they have since fallen sharply amid escalating financial turmoil that is curbing economic growth. - AFP/de
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