Crude oil fell, poised for its first annual decline in seven years, on concern that fuel stockpiles may increase as a deepening global recession reduces demand. U.S. gasoline inventories probably rose to the highest since August last week, according to a Bloomberg survey of analysts. South Korean factory production dropped by the most on record, adding to signs Asia’s fourth-largest economy will join Japan, Europe and the U.S. in a recession. Crude also fell on speculation that Israeli attacks on the Hamas-controlled Gaza Strip won’t disrupt supplies from the Middle East. “With most global economies struggling and credit markets still in an impaired state, it is hard to get too excited about the upside potential in energy markets attributable solely to geopolitical factors,” Edward Meir, an analyst at MF Global Ltd. in Connecticut, said in a note today. Crude oil for February delivery fell as much as 94 cents, or 2.4 percent, to $39.08 a barrel in electronic trading on the New York Mercantile Exchange. It was at $39.33 at 11:30 a.m. London time. Futures have declined 73 percent from a record $147.27 in July and are down 59 percent this year. U.S. gasoline stockpiles probably rose 1.5 million barrels in the week ended Dec. 26 from 207.3 million barrels the week before, according to the median of seven analyst estimates before an Energy Department report this week. All the analysts said there was a gain. Gasoline inventories have risen in 11 out of the past 13 weeks. For crude oil, opinion was mixed, with three analysts forecasting an inventory gain and four a decline. The Energy Department is scheduled to issue its weekly report tomorrow at 10:35 a.m. in Washington. The release time will change back to its original time of 10:30 a.m., starting Jan. 7. Brent Crude Brent crude oil for February settlement dropped as much as 92 cents to $39.63 a barrel on London’s ICE Futures Europe exchange and was trading at $40.04 at 11:30 a.m. Yesterday, the contract rallied $2.18, or 5.7 percent. “I’m still pretty bearish on oil,” said Mark Pervan, a senior commodities strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. “It’s cheap compared with where prices were six months ago, but it’s probably not cheap based on current market fundamentals.” South Korea’s statistics office said today industrial output slumped 14.1 percent from a year earlier in November, while the central bank said an index measuring manufacturers’ sentiment for January fell to a record low of 44, from 52 the previous month. Gaza Violence Oil pared gains after advancing yesterday on concerns that an escalation in Israeli attacks on the Gaza Strip may disrupt Middle East oil supplies. At least 345 Palestinians have been killed and 1,400 wounded since Israel started its aerial campaign on Gaza on Dec. 27, according to the Palestinian emergency services office in Gaza City. Israeli leaders said they began the bombardment to halt rocket attacks on southern towns by Islamic militants after a six-month cease-fire with Hamas expired Dec. 19. Still, oil futures may rebound from their worst year to average $60 a barrel next year as OPEC makes record production cuts to counter the deepest economic slump since World War II, according to the median forecasts of 33 analysts compiled by Bloomberg. The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, agreed on Dec. 17 to reduce daily production targets by 2.46 million barrels next month. Libya and the United Arab Emirates announced compliance with the cuts agreed on this month.

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