Crude oil fell after a government report showed a bigger-than-expected increase in U.S. supplies of gasoline and distillate fuel, a category that includes heating oil and diesel. Gasoline inventories rose 3.34 million barrels to 207.3 million barrels last week, the Energy Department said today in a weekly report. Stockpiles were forecast to increase by 750,000 barrels, according to a Bloomberg News survey. Distillate stockpiles climbed 1.81 million barrels to 135.3 million barrels. “Crude oil is set to continue on its downward spiral through the end of the year,” said John Kilduff, senior vice president of risk management at MF Global Inc. in New York. “The build in gasoline supplies last week will put further pressure on the market.” Crude oil for February delivery fell $1.41, or 3.6 percent, to $37.57 a barrel at 11:07 a.m. on the New York Mercantile Exchange. Prices have declined 74 percent from a record $147.27 on July 11. “We will probably test $35 and $30 before year’s end, as traders square their books,” Kilduff said. “We can expect prices to rebound next year.” Distillate stockpiles were forecast to increase by 700,000 barrels, according to the median of 12 analyst responses in the Bloomberg News survey. Last week’s increase left inventories at the highest since the week ended Nov. 2, 2007. Crude-oil supplies fell 3.1 million barrels to 318.2 million, the department said. Supplies were forecast to rise by 500,000 barrels. Fuel Demand U.S. fuel consumption during the four weeks ended Dec. 19 averaged 19.8 million barrels a day, down 4.2 percent from a year earlier, the report showed. New York futures, which have fallen 61 percent this year, are poised for the first annual drop in seven years, as supplies increased and the Organization of Petroleum Exporting Countries failed to cut production quickly enough amid declining demand. Prices also dropped on speculation demand will decline next year because of the recession in the biggest oil-consuming countries. The number of Americans filing first-time claims for unemployment insurance last week rose to a 26-year high. Initial jobless claims increased more than forecast to 586,000, the most since November 1982, from a revised 556,000 the prior week, the Labor Department said today in Washington. The four-week moving average of claims, a less-volatile measure, also was the highest since 1982. ‘Continuing Fear’ “The continuing fear about the economy and demand are the focus of the market,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. 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. The company will refine 7 percent less than the same period last year, according to a statement today. OPEC Secretary-General Abdalla El Badri said prices will probably reach the group’s target of $75 a barrel in early 2010, Al Hayat, a London-based Arab daily, reported. 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. Brent crude oil for February settlement declined $1.64, 4.1 percent, to $38.72 a barrel on London’s ICE Futures Europe exchange. Futures touched $37.49, the lowest since Dec. 13, 2004. Both the Nymex and ICE Futures Europe will be closed tomorrow. Floor trading in New York will end at 1:30 p.m. local time instead of the normal 2:30 p.m.

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