Oil falls slightly as stockpiles weigh

By Edward McAllister

NEW YORK (Reuters) - Oil prices fell marginally on Wednesday as government data showed U.S. crude stocks last week were at the highest level since September 1990.

The Energy Information Administration's weekly inventory report showed a 5.6-million-barrel rise in U.S. crude stocks, to 366.7 million barrels, beating analysts' expectations of a 1.9-million-barrel build.

U.S. crude for May delivery settled down 16 cents at $49.25 a barrel after a day of see-saw trading. ICE Brent crude settled down 17 cents at $51.79.

"Another week, another bearish inventory report. It has been negative week after week and yet the market hasn't collapsed," said Tom Bentz, senior commodity analyst at BNP Paribas Commodity Futures Inc in New York.

"It's defying fundamental logic, focussing instead on the dollar, the strength in the stock market and inflation fears -- that's what's keeping the oil price up."

The bearish inventory data outweighed a modest rise on the stock market, with the Dow Jones industrial average staying positive on Wednesday.

Oil prices have tumbled nearly $100 per barrel since last July, as the global recession dented oil demand, but they have recovered in recent months from a low of $32.40 in December.

A rally in equity markets this month, in the hope that the world economic outlook might be brightening, has helped boost oil prices, despite its weak supply-demand fundamentals.