Oil below $118 ahead of U.S. supply data

By Jane Merriman

LONDON (Reuters) - Oil eased on Wednesday from a record high of nearly $120 a barrel in the previous session, as traders anticipated a rise in crude oil stocks in the world's top energy consumer the United States.

U.S. crude CLc1 for June was down 69 cents at $117.38 a barrel at 1:55 p.m. The May contract expired on Tuesday at $119.37, after briefly hitting an all-time peak of $119.90.

London Brent crude LCOc1 was down 68 cents at $115.27, after touching a record high of $116.75 the previous session.

Latest weekly fuel inventory data from the U.S. Energy Information Administration due later on Wednesday is forecast to show a 1.2 million barrel rise in crude stocks last week, while gasoline stocks are expected to have fallen by 2.3 million barrels. <EIA/S>.

"We doubt this week's figures will do much to dent the recent advance," Edward Meir of broker MF Global said in a research note.

Oil has surged above $100 this year in response to booming demand from emerging markets such as China plus underinvestment in new oil supplies that have contributed to a fivefold increase in prices since 2002.

Hedge funds and other investors have poured money into oil, gold and other commodities because of turmoil in equity and bond markets related to the credit crisis.

"A lot of the movement up to $120 can be explained with financial demand. We don't feel $120 is justifiable in terms of underlying fundamentals," said Michael Waldron oil analyst at Lehman Brothers.