* U.S. crude oil stocks at highest level since 1990-EIA
* Disappointing U.S. economic data also weighs on oil
* Iran nuclear negotiations set for Friday
* Coming up: US jobless claims data 8:30 a.m. EDT Thursday
By Anna Louie Sussman and David Sheppard
NEW YORK, April 3 Oil prices fell 3 percent on
Wednesday in the steepest daily drop in five months, as U.S.
crude inventories rose to their highest since 1990 and as weak
economic data weighed on the outlook for demand.
Selling was widespread across oil markets with U.S. gasoline
leading the slide, dropping more than 4 percent and taking
losses for the last two sessions to almost 20 cents a gallon.
Brent crude oil for May delivery settled down $3.58
at $107.11 a barrel, the biggest one day percentage fall since
Nov. 3. During the session, Brent prices hit a four-month low of
$106.78 a barrel.
U.S. crude settled down $2.74 at $94.45 a barrel,
having fallen as low as $94.18. It settled below the 50-day
moving average of $94.64, a key technical indicator watched by
Selling started early in the New York session after a report
on U.S. private-sector employment from payrolls processor ADP
showed hiring was less than expected in March.
The decline accelerated shortly after the release of weekly
U.S. Energy Information Administration data showing a larger
than expected 2.7 million barrel increase in crude oil
The stocks are now at their highest since 1990, totalling
more than 388 million barrels, and are close to the all-time
peak hit in 1982 of 391.9 million barrels, EIA data showed.
"Inventories are 26 million over last year, well above the
four-year average," said Andy Lebow, vice president at Jefferies
Bache in New York
U.S. RBOB gasoline futures fell more than 4 percent,
after the EIA said gasoline stocks fell 572,000 barrels last
week, less than expected and far below the drop of 5 million
barrels reported late on Tuesday by the American Petroleum
"Gasoline bulls are particularly disappointed that the
tightness that they were counting on has not materialized," said
Timothy Evans, an energy analyst with Citi Futures Perspective
in New York.
With the North American heating fuel season waning and crude
futures sliding, U.S. heating oil futures, fell below the
50-day and 100-day moving averages, technical levels monitored
by chart watching analysts and traders.
Brent's premium to U.S. crude fell to $12.77,
back below $13 a barrel on Wednesday after it reached $14.66 on
The spread between the two contracts had been widened
because of expectations that crude stocks at the Cushing,
Oklahoma, delivery point for the U.S. crude contract would be
increasing after Exxon Mobil Corp shut its Pegasus
pipeline on Friday.
The pipeline moves crude oil from Illinois to the
refinery-rich Texas Gulf Coast and a prolonged shut down would
curb efforts to relieve the glut of crude oil in the Midwest.
Traders are also eyeing talks between Iran and six major
world powers over Tehran's nuclear program that will take place
on Friday and Saturday in Almaty, Kazakhstan.
Lead negotiator and European Union foreign policy chief
Catherine Ashton said Iran must respond to an offer made in
February to ease trading embargoes in exchange for Tehran's
agreement to suspend uranium enrichment.
The escalating standoff on the Korean peninsula was also in
focus on Wednesday as U.S. Defense Secretary Chuck Hagel said
there was a "real and clear danger" from North Korea.
The North Koran army said it had "ratified" an attack
against the United States and threatened a potential
"diversified nuclear strike," in a statement carried by the
English language service of North Korea's state news agency.
The disappointing report on hiring arrived ahead of Friday's
closely watched U.S. March nonfarm payrolls report, which
investors will sift through for signs of whether the economy has
been slowed by headwinds from a tighter fiscal policy, the
sequestration or automatic government spending cuts.
U.S. nonfarm payrolls are expected to be up 200,000,
according to a Reuters survey of economists.
The weak U.S. data adds to concerns about demand for oil,
well established already because of Europe's wobbly economy,
with reports this week showing unemployment up in the euro zone
and manufacturing gauges indicating contraction.
Europe's demand for oil has also been hit by seasonal
refinery maintenance, traders said.