BLBG: Oil Drops Amid Speculation U.S. Inventories Increased Last Week
Crude oil fell amid speculation a U.S. government report will show stockpiles climbed from the highest level since September 1990 as the recession saps fuel demand.
An Energy Department report tomorrow may show that inventories increased 2.55 million barrels in the week ended May 1 from 374.7 million the previous week, according to a Bloomberg survey before the report.
“For as long as demand remains weak, stock levels high and economic data fails to show solid evidence of recovery, oil is likely to be trapped in a $50 to $55 range,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London.
Crude oil for June delivery dropped as much as 77 cents, or 1.4 percent, to $53.70 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $54.07 a barrel at 12:52 p.m. London time. Oil is up 21 percent this year.
The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington.
Refineries probably operated at 83.1 percent of capacity, up 0.4 percentage point from the week before, according to the median of responses in the survey. Refineries operated at 85 percent of capacity in the week ended May 2, 2008.
Gasoline stockpiles probably rose 550,000 barrels from 212.6 million the prior week, according to the survey. Four analysts forecast an increase, one said there was a decline and one said supplies were unchanged.
Supplies of distillate fuel, a category that includes heating oil and diesel, probably rose 1 million barrels from 144.1 million. All six of the respondents forecast an increase.
“It weighs on prices when you have this amount of inventories weighing on the market,” Ed Morse, head of economic research at LCM Commodities LLC, said in Doha, where he was attending a conference. “Commercial inventories are expected to continue to build through the second quarter.”
Brent crude oil for June settlement fell as much as 92 cents, or 1.7 percent, to $53.66 a barrel on London’s ICE Futures exchange and traded at $54.22 at 12:54 p.m. local time.
