Oil prices fell this week as the US reported rising inventories, partly due to the first deliveries of crude from the Strategic Petroleum Reserve (SPR) and a last-minute recovery in the value of the dollar on Wednesday.
US light crude was down $1.40 at $98.19 per barrel in mid-day trading. Earlier in the day, prices had plunged by more than $2 per barrel.
In London, benchmark Brent crude fell $0.91 to $117.37 per barrel in late afternoon trading.
The US Energy Information Administration released data on Wednesday morning showing a surprise increase of 2.3 million barrels in crude inventories to 354 million barrels during the previous week.
Analysts polled by Reuters had forecast a fall of 1.7 million barrels. The increase was partly due to higher imports, which rose by nearly 500,000 barrels per day to 9.81 million bpd. There was also a boost from the delivery to companies of 2.27 million barrels of crude from the SPR, as announced in June by the International Energy Agency (IEA) as part of its effort to make up for lost Libyan supplies.
Another 28.4 million barrels are due to be delivered by the end of August.
The IEA overall release volume is 60 million barrels.
The Energy Information Administration data also showed increases in distillate and gasoline inventories, saying the former rose by 3.4 million barrels to 151.8 million barrels and the latter was up 1 million barrels at 213.5 million barrels.
Demand in the US has been weak, with the four-week average of 18.75 million bpd for products 2.9% lower than in the same period in 2010.
Refinery utilisation fell by two percentage points to 88.3%, the Energy Information Administration said.
On the economic front, US data showed new orders for long-standing US manufactured goods falling unexpectedly for June, but most attention was focused on the confrontation between Republicans and Democrats in Washington over the country’s debt level and how to deal with it.
The two parties have yet to find common ground with less than a week before the government hits its borrowing limit approved by Congress, triggering a possible default.