Oil price falls from five-month high to below $83

high of $83.33 a barrel reached earlier on Wednesday, because of nervousness ahead of the release of United  States’ inventory data.

According to a Reuters report, oil initially rose at the prospect of a second round of US Quantitative Easing which would bolster the economy of the world‘s largest oil consumer.

It was also supported by strong equity markets and a weak dollar.

However, traders said the market was wary of trading crude at above $83, in case the stock data from the Energy Information Administration showed a higher than expected rise in crude inventories.

”Equities are still higher, the dollar is still holding near lows, and sentiment remains bullish,” commodities analyst at VTB Capital in London, Andrey Kryuchenkov said.

”But people are just nervously waiting ahead of the US energy data.”

Front-month US crude rose 51 cents on Wednesday to a five-month high of $83.33 a barrel, before falling to trade 16 cents down on the day at $82.66.

ICE Brent fell 21 cents to $84.63.

Expectations have grown that the US Federal Reserve will early next month announce QE2 to boost growth, after the Bank of Japan cut interest rates on Tuesday.

Traders said the prospect of US QE2 had boosted oil in recent days, both directly by increasing expectations that the extra liquidity would be used to buy oil, and indirectly by supporting equities, which have been highly correlated with oil this year.

However, Olivier Jakob of consultants Petromatrix in Zug, Switzerland, said QE2 would only boost oil prices ”for a short while, because in the end the fundamentals count. We have high inventories, and high spare capacity upstream and downstream.”

Prices of US crude have over the past week topped the $70-$80 range for the first time in almost two months as investors anticipated central banks would embark on a second round of expansionary monetary policy to boost an anemic recovery.

US crude inventories gained 4.4 million barrels in the week to October 1, the American Petroleum Institute reported late on Tuesday, compared with average analyst expectations for a 300,000 barrel increase in a Reuters survey.

Stockpiles of petrol declined 4.1 million barrels last week, the API said, versus a forecast 200,000 barrel decrease, while supplies of distillate fuels including heating oil and diesel slid 777,000, nearly in line with the expected 900,000 barrel drop.

Government statistics on oil inventories and demand are due from the Energy Information Administration.

The pace of growth accelerated in the dominant US services sector last month even as it slowed among Chinese and European firms, boosting hopes the sluggish US economy was avoiding stagnation.