US oil demand from Nigeria drops

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Demand for Nigeria's oil by the United States, its biggest consumer, crashed this week as high crude stockpiles in America nears a 27-year high, forcing prices to slip below $71 per barrel (pb).

The stockpile has swiftly led to a weak demand, which threatens Nigeria's economy that relies 95 per cent on oil revenue.

The U.S buys more than one million barrels out of the 1.7 million barrels Nigeria produces per day.

Benchmark crude for October delivery was down $1.25 at $70.79 pb by noon on the New York Mercantile Exchange.

The contract gave up 43 cents on Friday to settle at $72.04 pb.

The recession has sapped fuel consumption in America, whose stockpiles are 14 per cent larger than last year, even as recent data suggests the economy is clawing out of recession.

The Energy Information Administration (EIA) said the country also is sitting on a sea of distillate fuels, including heating oil, with stockpiles approaching a 27-year high.

"Most of the macro data from the U.S. over the last month has been supportive of oil prices," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney.

"But inventories remain high and demand is weak, so that's capping prices."

Moore said crude will likely average $64 pb in the fourth quarter before rising to average $80 in the October to December period of 2010.

In Vienna, JBC Energy attributed part of the decline to "reports that Chinese diesel demand may not be recovering as fast as expected."

Expectations of strong Chinese demand in a recovering world economy have been a main driver of prices.

In other Nymex trading, gasoline for October delivery slipped by nearly three cents to $1.80 a gallon, and heating oil fell by more than three cents to $1.80 a gallon.