NEW YORK - Oil fell more than $2 on Wednesday after government data showed a sharp rise in U.S. gasoline inventories and more Asian countries cut fuel subsidies, adding to global demand concerns.
U.S. crude settled down $2.01 at $122.30 a barrel, the lowest settlement since May 6. London Brent crude settled $2.48 lower at $122.10 a barrel.
India and Malaysia became the latest Asian countries to raise fuel prices as the governments were no longer able to afford big subsidies due to surging fuel costs, heightening concerns that demand growth in the region could slow.
Consumption in the United States has already shown signs of faltering even as the world's top consumer enters the summer vacation season when gasoline demand generally peaks.
The U.S. Energy Information Administration reported gasoline inventories rose 2.9 million barrels last week -- the start of the summer driving season -- while gasoline demand over the past four weeks slumped 1.4 percent versus last year.
Distillate stocks jumped by 2.3 million barrels, while crude stocks fell 4.8 million barrels. Crude stockpiles at the Cushing, Oklahoma, delivery point for the New York Mercantile Exchange oil futures contract rose by 500,000 barrels.
"I think that bearish numbers in distillates and gasoline are overshadowing what on the surface appears to be a bullish number on crude," said Rob Kurzatkowski, futures analyst with optionsXpress in Chicago.
"Consumers are not driving unless they have to, and long-term this is going to weigh on gasoline and oil prices unless the trend reverses. That, combined with potential weakness in Asian demand, has longer-term implications."
Surging demand from emerging economies such as China and India have underpinned oil's six-year rally that has sent prices up six-fold.
WEAK DOLLAR
Wednesday's losses added to a more than $3 slide on Tuesday after U.S. Federal Reserve Chairman Ben Bernanke warned that the weakness of the dollar threatened to stoke inflation.
The comments helped firm the greenback and weakened crude, which surged to a record-high $135 a barrel last month as investors poured cash into oil and other commodities to hedge against inflation and the weak dollar.
"This could signal the end of the surge in dollar-based commodities which have attracted buyers who see it as a hedge against inflation," Robert Laughlin with MF Global said in a research note.
The dollar edged higher on Wednesday, supported by U.S. data showing a surprise rise in private-sector jobs and an unexpected expansion in the U.S. services sector.
U.S. crude settled down $2.01 at $122.30 a barrel, the lowest settlement since May 6. London Brent crude settled $2.48 lower at $122.10 a barrel.
India and Malaysia became the latest Asian countries to raise fuel prices as the governments were no longer able to afford big subsidies due to surging fuel costs, heightening concerns that demand growth in the region could slow.
Consumption in the United States has already shown signs of faltering even as the world's top consumer enters the summer vacation season when gasoline demand generally peaks.
The U.S. Energy Information Administration reported gasoline inventories rose 2.9 million barrels last week -- the start of the summer driving season -- while gasoline demand over the past four weeks slumped 1.4 percent versus last year.
Distillate stocks jumped by 2.3 million barrels, while crude stocks fell 4.8 million barrels. Crude stockpiles at the Cushing, Oklahoma, delivery point for the New York Mercantile Exchange oil futures contract rose by 500,000 barrels.
"I think that bearish numbers in distillates and gasoline are overshadowing what on the surface appears to be a bullish number on crude," said Rob Kurzatkowski, futures analyst with optionsXpress in Chicago.
"Consumers are not driving unless they have to, and long-term this is going to weigh on gasoline and oil prices unless the trend reverses. That, combined with potential weakness in Asian demand, has longer-term implications."
Surging demand from emerging economies such as China and India have underpinned oil's six-year rally that has sent prices up six-fold.
WEAK DOLLAR
Wednesday's losses added to a more than $3 slide on Tuesday after U.S. Federal Reserve Chairman Ben Bernanke warned that the weakness of the dollar threatened to stoke inflation.
The comments helped firm the greenback and weakened crude, which surged to a record-high $135 a barrel last month as investors poured cash into oil and other commodities to hedge against inflation and the weak dollar.
"This could signal the end of the surge in dollar-based commodities which have attracted buyers who see it as a hedge against inflation," Robert Laughlin with MF Global said in a research note.
The dollar edged higher on Wednesday, supported by U.S. data showing a surprise rise in private-sector jobs and an unexpected expansion in the U.S. services sector.
