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Commodities: Supply surprise batters oil

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Date: Thursday 17 Jul 2008

LONDON (ShareCast) - An unexpected surge in supplies last week had oil plunging for the second day in a row, falling as low as $132 a barrel at one stage Wednesday.

US crude inventories rose by 3 million barrels in the week ended 11 July to 296.9 million, according to the Energy Information Administration. Experts thought stockpiles would fall by between 2 and 3 million barrels.

August crude finished the session down $4.14 at $134.60 a barrel on the New York Mercantile Exchange, taking its two-day slide to $10.58, the biggest drop since the start of 1991.

The government figures also revealed a 2.4 million barrel rise in gasoline stocks, another surprise, while distillate supplies grew a bigger than expected 3.2 million barrels.

On the metals exchange, gold followed the trend set by oil traders, falling $16 to $962.70 an ounce in New York, with dollar strength adding to the downward pressure.

But analysts remained unconcerned given the current geopolitical outlook and nerves affecting financial markets. Many say a push back above $1,000 is on the cards.

Elsewhere, silver, copper, platinum and palladium all turned lower.

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