Oil price slips but holds close to $87
LONDON: World oil prices slipped on Wednesday, but held close to 87 dollars as traders geared up for the weekly energy inventories report in the United States, analysts said.
New York's main contract, light sweet crude for delivery in May, dropped 34 cents to 86.50 dollars a barrel.
London's Brent North Sea crude for May fell 17 cents to 85.98 dollars per barrel.
"The oil price is holding up well and has been defending its very high price level," said Commerzbank analyst Carsten Fritsch in a note to clients.
"Specifically, New York crude oil continues to trade at around 87 dollars a barrel."
Crude futures briefly hit a fresh 18-month high on Tuesday as the market found support from a recent batch of encouraging economic indicators in the United States, the world's largest energy consuming nation.
New York crude had touched 87.09 dollars -- the highest level since October 9, 2008.
Analysts said the focus was shifting to demand fundamentals ahead of the US Energy Information Administration (EIA) report due later Wednesday.
Market expectations are that American crude oil inventories grew by 1.3 million barrels last week, according to analysts polled by Dow Jones Newswires.
Gasoline or petrol stockpiles are seen falling by one million barrels, while distillates -- which include diesel and heating fuel -- are expected to decline by 1.3 million barrels.
"Some investors are concerned about how quickly prices have rallied," said Serene Lim, a Singapore-based oil analyst with the ANZ bank.
"Oil has gained more than five percent since last week and investors are beginning to be cautious in case the report proves to be bearish."
Investor mood was also affected by the EIA's monthly report on Tuesday that lowered its estimate for demand in the US, the world's largest energy consuming nation.
The EIA said it was reducing its US demand estimate to 160,000 barrels of crude per day, compared with 200,000 barrels in its previous report.
It also kept its global demand growth forecast at 1.5 million barrels per day for 2010, after two consecutive years of decline.
"EIA's assessment of world oil markets is largely unchanged from last month's outlook, and world oil prices will likely continue to firm and increase slightly in response to the global economic recovery," the report said.
The global oil markets were expected to remain in this situation "as long as the global economy continues to recover, and the Organisation of the Petroleum Exporting Countries remains satisfied with its constrained supply targets."