(Updates prices)
By Santosh Menon
LONDON, May 28 (Reuters) - Oil fell $2 to stand near $127 a
barrel on Wednesday, extending a slide from the previous session
amid growing signs Asian demand could start to falter as
consumer nations look to cut subsidies by raising fuel prices.
U.S. crude <CLc1> fell $2.12 to $126.73 a barrel by 1258
GMT, after dropping $3.34 on Tuesday and taking losses from last
week's record high of $135.09 to nearly 6 percent.
London Brent crude <LCOc1> was $1.55 down at $126.76 a
barrel.
Traders said the market was seeing more technicals-driven
selling, continuing the trend from the previous session.
Oil has also been knocked off its peak by growing evidence
that consumers are struggling to cope with surging prices.
Demand for oil in top consumer the United States and other
developed countries has been under pressure for some time now,
and signs are emerging that it could spread across Asia as
governments in the region take the knife to subsidies.
"There are signs that soaring energy prices are now even
starting to cause ripples in the booming Asian economies," said
Edward Meir at MF Global.
Smaller Asian oil consumers such as Taiwan, Indonesia and
Sri Lanka have all recently raised domestic fuel prices, and
India is also poised for a modest increase.
Analysts, however, expect the impact of hikes to be limited,
saying that top Asian consumer and the world's second-largest
oil consumer, China, appears set to resist pressure to raise
rates until after the summer Olympics. []
Soaring fuel costs have triggered a wave of protests around
the world, with convoys of trucks converging on London on
Tuesday, while in France fishermen blocked road and rail access
to the fuel depot of the country's largest oil refinery at
Gonfreville, owned by Total.
DOLLAR EFFECT
Oil's fall on Wednesday came as the dollar rallied after a
report showed that new orders for U.S. consumer goods for April
fell less-than-expected.
The U.S. greenback had also rallied on Tuesday after April
U.S. new-home data showed an unexpected rise, triggering a slide
in oil and other commodities bought by investors as a hedge
against inflation. []
Oil prices have jumped nearly 40 percent this year,
bolstered by a poor performing U.S. dollar as well as growing
fears about the industry's ability to keep pace with demand over
the next decade due to stagnating non-OPEC production growth.
Long-term fears have overshadowed relatively healthy
inventory levels in big consumers like the United States, where
crude stocks were expected to have risen by 100,000 barrels last
week while gasoline stocks dipped by the same volume. []
Inventories of distillates such as diesel and heating oil,
which have been the market's major driver due to robust demand,
were set to rise by 800,000 barrels, in line with seasonal
trends, a preliminary Reuters poll of analysts showed.
The data from the U.S. Energy Information Administration is
due on Thursday, a day later than usual due to the holiday.
(Additional reporting by Luke Pachymuthu in Singapore; editing
by James Jukwey)
