Crude oil was little changed in New York after dropping the most in seven years yesterday as falling consumption led to bigger-than-expected gains in supplies of crude, gasoline and distillate fuel. U.S. inventories of crude oil rose 6.68 million barrels to 325.4 million barrels last week, the highest since May, the Energy Department said yesterday in a weekly report. Supplies were forecast to increase 800,000 barrels, according to the median of forecasts by 14 analysts in a Bloomberg News survey. “This clearly signals that there is just no end-user demand,” said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne. “We took a big hit yesterday and the market is still digesting the really awful demand drop in the U.S.” Crude oil for February delivery was at $42.75 a barrel, up 12 cents, in electronic trading on the New York Mercantile Exchange at 1:50 p.m. Singapore time. The contract earlier fell as much as 39 cents, or 0.9 percent, to $42.24 a barrel. Yesterday, futures dropped $5.95, or 12 percent, to $42.63 a barrel, the lowest settlement since Dec. 30 and the biggest percentage decline since Sept. 24, 2001. Futures on the exchange are down 56 percent from a year ago. Brent crude oil for February settlement was at $45.96 a barrel, up 10 cents, on London’s ICE Futures Europe exchange at 1:51 p.m. Singapore time. Contango Market The price of oil for delivery in February 2010 is 41 percent more than for the current month, increasing the opportunity for traders to profit. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango. Contango trading encourages companies to increase stockpiles if they have available storage. “Traders are obviously chasing those higher forward prices but at they same time they are dragging the spot price down by artificially increasing the supply,” ANZ’s Pervan said. “By default it’s bringing the whole curve down.” Crude inventories at Cushing, Oklahoma, where oil that’s traded on Nymex is stored, climbed 14 percent to 32.2 million barrels last week, the highest since at least April 2004, when the department began keeping track of supplies there. Gasoline inventories rose 3.33 million barrels to 211.4 million barrels, the department said. Supplies were forecast to increase by 1 million barrels. Distillate supplies, which include heating oil and diesel, climbed 1.79 million barrels to 137.8 million barrels. A gain of 1.1 million barrels was forecast. Falling Demand U.S. fuel consumption during the four weeks ended Jan. 2 averaged 20.1 million barrels a day, down 2.9 percent from a year earlier, the Energy Department report showed. Imports of crude oil increased 13 percent to 10.5 million barrels a day last week, the biggest one-week gain since the week ended Oct. 3, when the Gulf Coast was recovering from Hurricanes Gustav and Ike. Refineries operated at 84.6 percent of capacity last week, up 2.1 percentage points from the week before, the report showed. Analysts forecast that there would be no change in utilization. Earlier this week, crude reached a five-week high on supply disruption concern amid a conflict between Israel and Hamas in the Gaza Strip, Russia’s gas dispute with Ukraine, and signs that OPEC members are enacting supply cuts. Prices later fell as manufacturing data indicated the U.S. recession is deepening. Saudi Foreign Minister Prince Saud al-Faisal said yesterday oil “isn’t a weapon” to end fighting in the Middle East. Prince al-Faisal, speaking at a press conference in New York, said oil “can’t reverse a conflict,” when asked about an Iranian call for Arab states to stop producing as a means of putting pressure on countries backing Israel. Oil surged in 1974, helping spur a recession in the developed world, after an oil embargo that followed the Arab- Israeli war in October 1973.

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