* U.S. crude stocks at Cushing near record levels - API
* For a short-term technical outlook, click: []
* Coming Up: EIA inventory report; 1430 GMT
(Updates prices, recasts, adds detail)
By David Sheppard
LONDON, April 28 (Reuters) - Oil fell for the third straight
session on Wednesday, taking losses this week to 4 percent on
excess crude supplies in the United States and widespread fears
a possible debt default in Greece could derail the recovery.
A day after ratings agency Standard & Poor's cut Greece's
credit rating to junk status and downgraded Portugal, investors
continued to pull cash out of risky investments such as energy.
The severity of the sovereign debt crisis saw one of the
most common measurements of market volatility, the Chicago Board
Options Exchange Volatility Index <.VIX> or 'fear index', jump
to its highest level since the immediate aftermath of the Lehman
Brother's collapse in late 2008.
"Market sentiment remains fragile and there is a
possibility that if we have more adverse economic news, we could
see prices decline further," said David Moore, an analyst at the
Commonwealth Bank of Australia.
"U.S. oil demand is weak. Over the course of this year we
may see inventories decrease a bit, but overall they will
probably remain relatively high."
U.S. crude for June delivery <CLc1> fell to a low of $81.29,
before paring losses to trade down 20 cents at $82.24 by 1126
GMT. Prices are down about $3 since Friday's close.
European shares slumped to a seven-week low on Wednesday
while the euro hit a one year-low against the dollar, further
pressuring commodity prices, before bouncing to trade slightly
higher on the day.
Oil and other dollar-denominated commodities tend to move in
the opposite direction to the greenback as a weaker dollar makes
them cheaper for other currency holders and vice versa.
RISING U.S. CRUDE STOCKS
Crude inventories in the United States rose 5.3 million
barrels in the week ended April 23, the American Petroleum
Institute (API) said on Tuesday. []
The gain was more than five times the number forecast by a
Reuters poll of oil analysts, aided by soaring stockpiles at the
delivery point of the main U.S. crude futures contract.
Stocks at Cushing, Oklahoma rose by 401,000 barrels last
week to 34.6 million barrels, close to the record high 35.4
million barrels reported by the industry-funded API on Jan. 1.
The oil glut in the U.S. Midwest is creating distortions in
oil futures markets. The front-month U.S. crude contract, which
usually trades at a premium to European benchmark ICE Brent
futures, was almost $3.60 lower, its biggest discount in eight
months. June Brent was down 31 cents at $85.47 a barrel.
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For a graphic of Brent futures against U.S. crude, click on:
http://link.reuters.com/hyf69j and for story click:
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Traders awaited government statistics on inventories from
the U.S. Energy Information Administration on Wednesday at 1430
GMT. Crude, gasoline and distillate stocks are all expected to
rise. []
U.S. retail gasoline demand dropped 2.7 percent in the week
to April 23 from the previous week, according to a MasterCard
SpendingPulse report on Tuesday. Year-on-year, U.S. gasoline
demand fell 1.9 percent, the report said. []
Demand in developed economies is expected to barely grow or
even fall in 2010, but rapid growth in emerging markets should
still see global consumption rise by around 1.7 milllion barrels
next year, according to the International Energy Agency. []
Rising global demand has supported oil prices, benefiting
oil majors like Royal Dutch Shell Plc <RDSa.L> and BP <BP.L>.
<BP.N>, which have both posted better-than-expected
first-quarter results in the last two days. []
(Additional reporting by Alejandro Barbajosa in Singapore;
Editing by Keiron Henderson)
