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London: Oil fell on Wednesday as slowing demand outweighed an unexpected Organisation of Petroleum Exporting Countries (Opec) crude production cut and a steep drop in US inventories.
US crude traded down $1.41 at $101.85 a barrel by 1537 GMT, after hitting fresh five-month lows. London Brent crude fell $1.67 to $98.67 after falling below $100 on Tuesday for the first time since April.
Opec lowered its production ceiling to 28.8 million bpd from earlier targets of 29.67 million bpd, ministers said, despite expectations it would keep existing output allocations.
Analysts said the group was seeking to support the market at around $100 a barrel after prices plunged from a record over $147 a barrel in July, as high fuel prices and the wider economic crisis slow demand in the US and other consumer nations.
US government data showed total product demand in the world's top consumer off 3.8 per cent in the four-weeks ending September 5, after the International Energy Agency (IEA) cut its 2008 and 2009 global demand growth forecasts earlier yesterday.
US crude oil stocks fell by 5.9 million barrels last week, according to the US Energy Information Administration, after Hurricane Gustav shut down oil and natural gas production in the Gulf of Mexico last week.
Inventories in the US refining hub along the Gulf Coast rose however, as Gustav forced the temporary closure of some plants.
"Trying to make sense of the numbers is difficult. But it doesn't seem like the market is paying too much attention to fundamentals anyway," said Tom Bentz, Analyst for BNP Paribas Commodities Futures Inc.
"It's more concerned with the economic situation and that seems to be driving it."
Gasoline stocks dropped 6.5 million barrels compared with forecasts for a 4.2 million barrel draw, while stockpiles of distillates fell 1.2 million barrels, lower than forecasts for a 2.7 million barrel drop.
Oil earlier found support from an earthquake that struck southern Iran near Bandar Abbas, site of a major Iranian oil refinery, but officials later said energy infrastructure had not been damaged. The IEA lowered its 2008 world oil demand growth forecast by 100,000 bpd due to the impact of weaker economic conditions and high prices.
Traders were also keeping a close eye on Hurricane Ike as it churned through the Gulf of Mexico on a track that will likely skirt the heart of the US offshore oil patch before it slams into the Texas coast on Saturday.
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