Crude slides 2% to under $79 a barrel after EIA report NEW YORK (MarketWatch) - Crude-oil futures slumped for a third session on Wednesday, with losses accelerating after the Energy Information Administration reported bigger-than-expected increases in U.S. supplies of crude and distillates, including heating oil. Analysts expected cold temperatures to boost energy demand and reduce inventories. Crude oil for February delivery was recently down $1.92, or 2.4%, at $78.87 a barrel at the New York Mercantile Exchange. The contract earlier hit an intraday low of $78.30 a barrel in electronic trade. The latest move lower came after the EIA said crude-oil supplies rose 3.7 million barrels in the week ended Jan. 8. Analysts polled by Dow Jones expected inventories to rise by 1 million barrels, while those surveyed by Platts expected a 1.9-million-barrel increase. U.S. distillate inventories were up 1.4 million barrels. Analysts polled by Platts expected a drawdown of 1.7 million barrels. The results showed even bigger increases in supplies than estimated by the American Petroleum Institute, an industry research group. "These numbers prove in an impressive fashion that there is no supply shortage of oil and oil products in the U.S. and that the cold weather is a mere pretext for the latest price rally," said analysts at Commerzbank AG in a note to clients. Heating oil for February delivery was down 5 cents, or 2.4%, at $2.08 a gallon. Natural gas for the same month, however, rose 8 cents, or 1.5%, to $5.67 per million British thermal units. The EIA will report on weekly natural-gas supplies on Thursday. Analysts polled by Platts expect a drawdown of 253 billion to 258 billion cubic feet from U.S. supplies. 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 0.5 percentage 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.

Source