Oil dips to $121 as reserves grow

Oil prices have risen more than 40% so far this year.

Oil prices fell by more than $2 a barrel on Wednesday as latest figures showed US petrol reserves had risen more than expected.

Analysts said the increase suggested demand for oil from developing economies was slowing.

In London, Brent crude fell $2.82 to $121.76, while in New York, light, sweet crude dipped as low as $121.84.

The price of oil has been falling in the last two weeks since it hit a record of $135 a barrel on 22 May.

"The days of establishing new record prices appear to be temporarily over," said Victor Shum, an energy analyst from consultancy Purvin and Gertz.

Subsidies cut

Rising fuel prices in fast-growing economies such as India may cause demand to fall, analysts suggest.

The governments of India and Malaysia effectively increased fuel prices on Wednesday by reducing subsidies on oil.

In India, the price of fuel will rise by 10%, and in Malaysia, petrol prices will increase by 40%.

As well as indications of falling demand for the commodity, the price of oil has also been falling as the US dollar has strengthened.

A weaker dollar has made commodities a more attractive investment.