Inventory data from American Petroleum Institute due later Tuesday Oil futures fell sharply Tuesday, pressured by ongoing concerns over slowing energy demand and expectations of further builds in U.S. crude inventories. Crude oil for March delivery dropped $1.38, or 3%, to $44.35 a barrel on the New York Mercantile Exchange. "A key feature remains any further manifestations of the weak demand which has plagued prices for months; for this reason, we believe crude oil prices remain vulnerable," said analysts at Sucden Financial Research in a note. Oil futures tumbled from a three-week high on Monday, ending lower for the first session in five, as roughly 50,000 job cuts were announced by U.S. companies and several overseas firms. "We still seem to be firmly mired in recessionary conditions, and while commodity rallies still could come our way, these moves should be greeted with a high degree of skepticism," said Edward Meir, an analyst at MF Global. Commodities across the board posted losses Tuesday. Gold futures fell from a four-month high as a strengthening dollar and falling oil prices reduced the metal's investment appeal. The Reuters/Jefferies CRB Index , a benchmark that gauges the prices of major commodities, fell 0.4%. Venezuela's President Hugo Chavez said Monday the Organization of Petroleum Exporting Countries could further cut oil production to bolster oil prices, the Associated Press reported. Chavez said that the OPEC oil cartel could reduce production by four million more barrels per day if it's necessary, according to the report. Back in December, OPEC members agreed to reduce production by 2.2 million barrels a day starting in January. Tracking agency Petrologistics has reported that OPEC's oil output will fall by 1.55 million barrels per day in January. Further supply builds expected "Crude prices are expected to remain under pressure ahead of Wednesday's weekly EIA inventory data, where a fifth straight week of supply builds is forecast," said analysts at Action Economics. At 10:30 a.m. Eastern on Wednesday, the U.S. Energy Information Administration will release data on petroleum supplies for the week ended Jan. 23. The American Petroleum Institute, a trade organization, will release a separate inventories report at 4:30 p.m. Eastern on Tuesday, having moved its release forward by a day. Analysts expect a 3.4 million barrel build in U.S. commercial crude oil stocks in this week's oil inventory data, according to a Platts survey. They also project a build of 1.8 million barrels in gasoline stocks and a decline of 1.8 million barrels in distillate supplies. Analysts project a 0.6 percentage point drop in refinery utilization due to the maintenance, to 82.7%, according to the survey by Platts. The stock build will likely be concentrated outside of Cushing, Okla., the delivery point of the Nymex crude-oil futures contract, where inventories have hit record highs this month with the forward curve in a steep contango, according to Platts. Contango is a situation where near-term prices are lower than those of later months. Last week, the EIA reported that U.S. crude supplies rose by 6.1 million barrels to stand at 332.7 million barrels during the week ended Jan. 16. Also on Nymex Tuesday, March reformulated gasoline fell 2 cents to $1.17 a gallon and March heating oil dropped 2 cents to $1.40 a gallon. February natural-gas futures rose 6 cents to $4.55 per million British thermal units.

Source