BLBG: Oil Falls on Signs Fuel Supplies Will Gain as Demand Declines
Crude oil fell, poised for its first annual decline in seven years, on speculation that U.S. fuel stockpiles are increasing as the recession reduces demand.
U.S. gasoline supplies probably rose to the highest since August last week, according to a Bloomberg News survey conducted before an Energy Department report. South Korean factory output dropped the most on record, adding to signs Asia’s fourth-largest economy will join Japan, Europe and the U.S. in a recession.
“The predominant feature that’s been guiding the oil market is poor demand,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. “Most analysts are expecting tomorrow’s report to show a build in the products and a drop in crude.”
Crude oil for February delivery fell $1.11, or 2.8 percent, to $38.91 a barrel at 9:16 a.m. on the New York Mercantile Exchange. Futures have declined 74 percent from a record $147.27 on July 11.
Prices rose as much as $4.49, or 12 percent, to $42.20 a barrel yesterday after Israeli air strikes in the Gaza Strip raised concern that supply from the Middle East, the world’s largest oil-producing region, may be disrupted.
“The rally to over $42 yesterday on the fighting in Gaza was probably exaggerated because of the holiday conditions,” McGillian said.
Prices may be more volatile this week because many traders are taking time off for the New Year’s holiday.
U.S. gasoline stockpiles probably rose 1.6 million barrels in the week ended Dec. 26, from 207.3 million barrels the week before, according to the median of 12 analyst estimates before tomorrow’s report. Supplies of distillate fuel, a category that includes heating oil and diesel, increased 1.5 million barrels from 135.3 million, the survey showed.
Oil Inventories
Crude-oil inventories dropped 1.7 million barrels from 318.2 million barrels last week, according to the survey.
The Energy Department is scheduled to issue its weekly report tomorrow at 10:35 a.m. in Washington. The release time will change to its original time of 10:30 a.m., starting Jan. 7.
Brent crude oil for February settlement declined 68 cents, or 1.7 percent, to $39.87 a barrel on London’s ICE Futures Europe exchange.
