TOKYO - Oil prices steadied at above $122 a barrel on Wednesday, attempting to put a floor under their steepest slide in a year and a half as traders looked ahead to an expected rise in fuel inventories amid eroding U.S. demand.
Prices, which are now at their lowest in nearly three months, were also under pressure from signs of strength in the U.S. dollar, which held firm after rallying on a combination of weaker oil prices and an unexpected rise in U.S. consumer confidence.
U.S. light crude for September fell 4 cents to $122.15 a barrel by 12:40 a.m. EDT after slumping by $2.54 on Tuesday, hitting an intra-day low of $120.42, the lowest since May 6 and marking the sharpest percentage sell-off in prices since early 2007.
London Brent crude was up 4 cents to $122.75 a barrel.
"The reason prices are coming off is that there are expectations for inventory builds...on reduced demand," said Robert Nunan, a risk management executive at Tokyo-based Mitsubishi Corp.
U.S. crude stocks were expected to have fallen by 1.6 million barrels last week, but gasoline inventories were seen rising by 200,000 barrels and distillates by 1.9 million barrels, according to a Reuters poll ahead of data due later on Wednesday.
Oil has fallen more than 17 percent from a record high of $147.27 set on July 11, pressured by signs that high prices and an economic slowdown are curbing demand, especially in the United States.
The EIA said on Monday U.S. oil demand in May was 660,000 barrels per day less than previously thought, while a separate government report said motorists drove 2.4 percent less during the first five months of the year than the year before.
A firmer dollar is also reducing the appeal of commodities to some investors playing the strong negative correlation between the markets in recent months, analysts have said.
OPEC President Chakib Khelil said on Tuesday that oil prices were still abnormally high, and member nations should not cut supply as the oil market is now in balance.
Khelil, who is also Algeria's oil minister, said oil prices could fall to $80 in the long term, if the U.S. dollar continued to rise and geopolitical anxieties eased.
But supply disruptions could limit losses, with traders particularly focused on Nigeria, where Royal Dutch Shell has been forced to declare force majeure on Bonny Light exports after militants blew up parts of a key pipeline.
Prices, which are now at their lowest in nearly three months, were also under pressure from signs of strength in the U.S. dollar, which held firm after rallying on a combination of weaker oil prices and an unexpected rise in U.S. consumer confidence.
U.S. light crude for September fell 4 cents to $122.15 a barrel by 12:40 a.m. EDT after slumping by $2.54 on Tuesday, hitting an intra-day low of $120.42, the lowest since May 6 and marking the sharpest percentage sell-off in prices since early 2007.
London Brent crude was up 4 cents to $122.75 a barrel.
"The reason prices are coming off is that there are expectations for inventory builds...on reduced demand," said Robert Nunan, a risk management executive at Tokyo-based Mitsubishi Corp.
U.S. crude stocks were expected to have fallen by 1.6 million barrels last week, but gasoline inventories were seen rising by 200,000 barrels and distillates by 1.9 million barrels, according to a Reuters poll ahead of data due later on Wednesday.
Oil has fallen more than 17 percent from a record high of $147.27 set on July 11, pressured by signs that high prices and an economic slowdown are curbing demand, especially in the United States.
The EIA said on Monday U.S. oil demand in May was 660,000 barrels per day less than previously thought, while a separate government report said motorists drove 2.4 percent less during the first five months of the year than the year before.
A firmer dollar is also reducing the appeal of commodities to some investors playing the strong negative correlation between the markets in recent months, analysts have said.
OPEC President Chakib Khelil said on Tuesday that oil prices were still abnormally high, and member nations should not cut supply as the oil market is now in balance.
Khelil, who is also Algeria's oil minister, said oil prices could fall to $80 in the long term, if the U.S. dollar continued to rise and geopolitical anxieties eased.
But supply disruptions could limit losses, with traders particularly focused on Nigeria, where Royal Dutch Shell has been forced to declare force majeure on Bonny Light exports after militants blew up parts of a key pipeline.
