Source: Channel NewsAsia

Oil prices slumped on Wednesday after new data showed lofty supplies of US crude, suggesting weak demand in the world's biggest economy.

NEW YORK: Oil prices slumped on Wednesday after new data showed lofty supplies of US crude, suggesting weak demand in the world's biggest economy.

US crude benchmark West Texas Intermediate for May delivery closed at $94.45 a barrel, down $2.74, or 2.8 per cent.

European benchmark Brent oil for May delivery settled at $107.11, down $3.58 a barrel, or 3.2 per cent.

The sharp declines came as the weekly inventory report from the US Energy Information Administration showed US crude reserves rose 2.7 million barrels to 388.6 million barrels.

That was far bigger than market expectations of a gain of 1.5 million barrels, according to analysts polled by Dow Jones Newswires.

The report also showed only a modest decline of 600,000 barrels of gasoline stocks, slightly more than the draw seen by analysts.

Stephen Schork, an analyst with the Schork Group, attributed the drop in crude oil to a retreat in gasoline prices in recent days.

"Inventories are comfortable," Schork said, adding that oil refineries are coming out of maintenance season. "So our ability to make even more gasoline will increase in the weeks ahead."

The US private sector added just 158,000 jobs in March, according to payrolls firm ADP, well below the estimate of 197,000 seen by analysts.

Growth in the US services sector also slowed in March, according to data from the Institute for Supply Management. The ISM said the non-manufacturing purchasing managers index fell to 54.4 in March, down from 56 in February.

"The inventory report is overlapping with a little bit of economic uncertainty" after the weak ISM report, said Gene McGillian, analyst and broker at Tradition Energy.

Bart Melek, head of commodity strategy at TD Securities, said the oil market was also reacting to speculation of a possible agreement between Western powers and Iran over Iran's nuclear program.

Tensions with Iran have boosted oil prices in recent months due to concerns over Iran's threat to blockade the Strait of Hormuz, a critical transport waterway for oil.