Oil prices fell sharply this afternoon amid weakness in equity markets and expectations of a substantial increase in US oil supplies. The American Petroleum Institute (API) said in a report late on Tuesday that crude stockpiles in the US added four million barrels last week, suggesting that the market is very well supplied. The massive gain reported by API has led traders to expect to see a multi million barrel increase in today's official inventories data from the US Department of Energy, which will be out later in the session. Futures for crude oil fell further after the House of Representatives postponed Wednesday's vote on a debt reduction planned proposed by House Speaker John Boehner. The move made it less likely that the US lawmakers will be able to agree on a debt deal and raise the country's borrowing limit by the 2 August deadline, which could force the US to go into a default. Boehner's plan to cut US$1.2 trillion in budget expenses over the next decade faced criticism within his own party with his fellow Republicans arguing that the budget cuts should be increased. The markets are trying to assess the potential damage that the global economy could suffer if the US failed to raise the debt ceiling on time as well as the impact on energy demand.

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