On Behalf of 

Business & Finance Club - Oil & Gas: Oil fell for the third straight session Wednesday, taking losses this week to 4 per cent on excess crude supplies in the US and widespread fears a possible debt default in Greece could derail the recovery.

Standard & Poor's on Tuesday cut Greece's credit rating to junk status and downgraded Portugal, prompting investors to pull cash out of riskier investments like energy.

The severity of the sovereign debt crisis saw one of the most common measurements of market volatility, the Chicago Board Options Exchange Volatility Index or "fear index", jump to its highest level since the immediate aftermath of the Lehman Brothers collapse in late 2008.

"Market sentiment remains fragile and there is a possibility that if we have more adverse economic news, we could see prices decline further," said Commonwealth Bank of Australia analyst David Moore.

"US oil demand is weak. Over the course of this year we may see inventories decrease a bit, but overall they will probably remain relatively high."

US crude for June delivery fell $1 to $81 (Dh297), heading for a cumulative drop of near $3 in the last two trading sessions.

The euro slumped to a one-year low against the dollar yesterday, further pressuring commodity prices. Oil and other dollar-denominated commodities tend to fall as the dollar rises as they become more expensive for holders of other currencies.

Crude inventories in the United States rose 5.3 million barrels in the week ended April 23, the American Petroleum Institute (API) said on Tuesday.

The gain was more than five times the number forecast by a Reuters poll of oil analysts, aided by soaring stockpiles at the delivery point of the main US crude futures contract.

Stocks at Cushing, Oklahoma rose by 401,000 barrels last week to 34.6 million barrels, close to the record high 35.4 million barrels reported by the industry-funded API on January 1.

The oil glut in the US Midwest is creating distortions in oil futures markets.

The front-month US crude contract was almost $3.60 lower, its biggest discount in eight months. June Brent was down 77 cents at $85.01 a barrel.

Traders awaited government statistics on inventories from the US Energy Information Administration later yesterday. Crude, gasoline and distillate stocks were all expected to rise.