Crude oil fell from a five-month high on speculation a government report will show that U.S. supplies climbed to the highest level in 18 years. An Energy Department report tomorrow will probably show that crude-oil inventories increased 2.5 million barrels last week, according to a Bloomberg News survey. Prices surged yesterday as the Standard & Poor’s 500 Index erased its 2009 loss and pending sales of existing U.S. homes jumped. “The market keeps rising on a rather shaky foundation,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “You are still sitting on a lot of inventory.” Crude oil for June delivery fell 56 cents, or 1 percent, to $53.91 a barrel at 10:44 a.m. on the New York Mercantile Exchange. Futures touched $54.83, the highest since Nov. 28. Oil is up 21 percent this year. The Energy Department is scheduled to release its weekly inventory report tomorrow at 10:30 a.m. in Washington. Supplies rose 4.05 million barrels to 374.7 million barrels in the week ended April 24, 15 percent above the five-year average for the period. Gasoline stockpiles probably rose 1 million barrels from 212.6 million the prior week, according to the median of 11 responses in the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably increased 1 million barrels from 144.1 million. ‘Weighs on Prices’ “It weighs on prices when you have this amount of inventories weighing on the market,” Ed Morse, New York-based head of economic research at LCM Commodities LLC, said in Doha, Qatar, where he was attending a conference. “Commercial inventories are expected to continue to build through the second quarter.” Global oil demand falls to an annual low during the second quarter as refineries shut to perform maintenance after the Northern Hemisphere winter. Refineries probably operated at 83 percent of capacity, up 0.3 percentage point from the week before, according to the median of responses in the survey. The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington. Energy markets have been sensitive to economic data since the U.S. recession began in December 2007. A report on May 8 may show the unemployment rate reached 8.9 percent in April, according to a Bloomberg News survey of economists. “There’s a big difference between a slowing contraction and solid growth,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York. “The back of this recent rally may be broken by either the inventory numbers tomorrow or the jobs numbers on Friday.” Brent crude oil for June settlement declined 44 cents, or 0.8 percent, to $54.14 a barrel on London’s ICE Futures exchange.

Source