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US oil price slumps after pipeline cutback

US crude oil prices closed sharply lower Wednesday, dragged down by news that a key pipeline had cut capacity due to a bottleneck.

New York's main contract, West Texas Intermediate, for delivery in March, tumbled $1.45 from Tuesday's close to settle at $95.23 a barrel.

In London trade, meanwhile, Brent North Sea crude for delivery in March settled at $112.80 a barrel, an increase of 38 cents.

The New York market, which had been trading slightly lower for most of the session, dived after the operator of the Seaway pipeline told shippers that capacity had been reduced because of an unexpected problem at a delivery point.

"When that headline came out, the WTI immediately came under a significant amount of pressure," said Andy Lipow, an independent oil analyst.

The Seaway carries crude stocked in Cushing, Oklahoma, the main oil terminal in the world's biggest crude consumer, to refineries in the Gulf of Mexico.

Lacking sufficient pipeline capacity to bring oil to refineries, Cushing stockpiles have swollen recently to new record highs, weighing on futures prices.

Traders were keenly awaiting the US Department of Energy's latest weekly report on petroleum stockpiles. The data will be published Thursday, one day later than normal, due to a public holiday on Monday.

"Traders now expect upcoming US government oil inventory data to show crude-oil stocks dropped 2.3 million barrels last week," ETX Capital markets analyst Ishaq Siddiqi said.

Siddiqi said there had been a "bit of profit taking in crude following four sessions of gains, with many (traders) expecting refiners to start seasonal maintenance that will reduce crude oil demand."