Oil falls on U.S. fuel stock build, demand worries

By Matthew Robinson

NEW YORK (Reuters) - Oil fell more than $2 on Wednesday after government data showed a sharp rise in U.S. gasoline inventories and more Asian countries cut fuel subsidies, adding to global demand concerns.

U.S. crude settled down $2.01 at $122.30 a barrel, the lowest settlement since May 6. London Brent crude settled $2.48 lower at $122.10 a barrel.

India and Malaysia became the latest Asian countries to raise fuel prices as the governments were no longer able to afford big subsidies due to surging fuel costs, heightening concerns that demand growth in the region could slow.

Consumption in the United States has already shown signs of faltering even as the world's top consumer enters the summer vacation season when gasoline demand generally peaks.

The U.S. Energy Information Administration reported gasoline inventories rose 2.9 million barrels last week -- the start of the summer driving season -- while gasoline demand over the past four weeks slumped 1.4 percent versus last year.

Distillate stocks jumped by 2.3 million barrels, while crude stocks fell 4.8 million barrels. Crude stockpiles at the Cushing, Oklahoma, delivery point for the New York Mercantile Exchange oil futures contract rose by 500,000 barrels.

"I think that bearish numbers in distillates and gasoline are overshadowing what on the surface appears to be a bullish number on crude," said Rob Kurzatkowski, futures analyst with optionsXpress in Chicago.

"Consumers are not driving unless they have to, and long-term this is going to weigh on gasoline and oil prices unless the trend reverses. That, combined with potential weakness in Asian demand, has longer-term implications."