Oil fell sharply this afternoon after US government data showed a rise in crude oil and petrol stocks last week.
Prices had already dropped steeply in the previous session on expectations that a faltering economy in top energy consumer the US would hit demand growth.
US crude was $5.45 down at $133.29 a barrel, while London Brent crude was $4.85 down at $133.90 a barrel.
US crude oil stocks rose 3 million barrels last week, when analysts had predicted a fall of 2.1 million barrels. Petrol stocks rose 2.4 million barrels versus a forecast for a 400,000 barrel draw. Distillates rose 3.2 million barrels, when analysts had predicted a rise of 2 million.
Investors have pumped cash into oil and other commodities this year looking to hedge against inflation and the weak dollar, which has helped drive crude oil up about 50% from the start of this year to a record above $147 a barrel earlier in July.
The world's top oil exporter Saudi Arabia wants to see lower oil prices, Saudi King Abdullah said in an interview with an Italian newspaper today.
'When the price of oil hovered around $100 a barrrel, we were already unhappy. Imagine what we feel now, when there is talk of $200,' he said.
Oil's six-year rally has been driven partly by ballooning demand from developing economies such as China and India. But consumers in large economies like the US, already feeling the pinch of the credit crunch and housing crisis, have begun to scale back on energy use, with retail petrol demand down more than 5% last week from a year ago.
