Crude prices trade below $80 a barrel after inventory report by API FRANKFURT (MarketWatch) -- Crude futures dropped below $80 a barrel on Wednesday, falling for a third session, as an industry group reported large builds in U.S. petroleum inventories, rekindling worries that energy demand remains weak. Crude oil for February delivery fell $1.04, or 1.3%, to $79.75 a barrel in electronic trading on Globex. The contract earlier hit an intraday low of $79.55 a barrel. The latest decline came after the American Petroleum Institute reported late Tuesday that distillate stocks rose by 3.6 million barrels last week, while analysts polled by Platts expected a drawdown of 1.7 million barrels. Distillate stocks rose sharply, even though cold weather in the U.S. was expected to have led to higher consumption of heating oil. "These numbers prove in an impressive fashion that there is no supply shortage of oil and oil products in the United States and that the cold weather is a mere pretext for the latest price rally," said analysts at Commerzbank AG in a note to clients. Gasoline stocks increased by 6.8 million barrels and crude stocks rose by 1.2 million barrels, the API also said. Analysts expected a buildup of 1.6 million barrels in gasoline stocks and a 1.9-million-barrel increase in crude supplies, according to a Platts survey. The U.S. Energy Information Administration (EIA) will release its more closely watched inventory data at 10:30 a.m. Eastern on Wednesday. The EIA uses different criteria to calculate inventories than those used by the API. Oil futures fell 2% on Tuesday on the New York Mercantile Exchange, hit by forecasts of milder temperatures and moves by China to stem its economic expansion. The People's Bank of China lifted the reserve requirements for banks by a half point and lifted its interbank rate for the second time in a week. These moves are seen as a sign that the Chinese authorities may be trying to cool the country's rapid economic growth. Oil and other commodity prices have been rising partly on optimism that China's thirst for natural resources will continue unabated as its economy expands. As a result, attempts to slow down Chinese growth tend to weigh on commodity prices. Oil prices had also declined on Monday, pulling back from 15-month highs.

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