Crude oil fell, dropping briefly below $37 a barrel in New York, before a report forecast to show that U.S. inventories rose for a third week on ebbing demand. Crude stockpiles probably increased 500,000 barrels in the week ended Dec. 19 from 321.3 million the week before, the 12th gain in 13 weeks, according to a Bloomberg survey before today’s Energy Department report. Idemitsu Kosan Co., Japan’s second- biggest refiner, will cut crude processing next quarter because of weak demand in the third-largest oil-consuming nation. Last week, OPEC announced a record production cut to counter declining consumption. “With more stock builds expected this afternoon, oil is on course for $35,” said Robert Montefusco, a broker with Sucden Financial Ltd. in London. “What we’re seeing today is the general picture of weak demand being exaggerated by the lack of volume in the market.” Oil for February delivery fell for a third day, losing as much as $2.35, or 6 percent, to $36.63 a barrel on the New York Mercantile Exchange. The contract traded at $37.17 at 1:50 p.m. London time. Crude fell to $32.40, its lowest in more than four years, on Dec. 19, when the January contract expired. Brent crude oil for February settlement fell as much as $2.87, to $37.49 a barrel, and traded at $38.06 as of 1:51 p.m. London time, on the ICE Futures Europe exchange in London. ICE will close early today at 2 p.m. London time, instead of 11 p.m. Low Volume Trading volumes are low before the holidays with 30,753 lots of Brent traded as of 12:47 p.m. London time, compared with yesterday’s closing volume of 79,571 lots. Both the Nymex and ICE Futures will be closed tomorrow. Oil has fallen 60 percent this year, poised for the first annual decline in seven years, as stockpiles increased and OPEC failed to cut production quick enough to stem falling consumption. “There isn’t a lot of upside for oil prices, stocks are rising and refineries are not necessarily buying oil,” said Peter Luxton, an energy analyst at Informa Global Markets. “OPEC will begin to rein in production.” The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, may meet before its next scheduled summit in March after cutting production quotas on Dec. 17, Venezuelan Energy Minister Rafael Ramirez said yesterday. OPEC Secretary-General Abdalla El Badri said prices will probably reach the group’s target of $75 a barrel in early 2010, Al Hayat reported. Officially, OPEC doesn’t have a formal price target, though many members, including Saudi Arabia, have said the industry needs a $75 price to ensure adequate investment in new fields. Slower Economy In another indication of the slowing U.S. economy, the median resale price of homes fell 13 percent, probably the largest drop since the Great Depression, National Association of Realtors Chief Economist Lawrence Yun said in Washington. Production has stopped at some oil and gas wells off the northwest coast of Australia because of a cyclone. Nexus Energy Ltd. and Woodside Petroleum Ltd. both said that rigs they operated are closed because of tropical storm Billy, with winds of up to 60 knots and sea swells of up to four meters. Oil for delivery in February 2010 was more than $14 higher than the current month today, a market condition known as contango. The pattern encourages companies to store oil. “The contango means the inventories are increasing,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “More-than-adequate levels of inventories will push prices down. It’s a very, very bearish sign.”

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