By Grant Smith May 14 (Bloomberg) -- Crude oil fell to its lowest price in more than three months on speculation that Europe’s sovereign- debt crisis and rising supplies in the U.S. indicate that the demand recovery is losing momentum. Oil dropped for a fourth day as the euro traded near a 14- month low against the dollar, damping the investment appeal of commodities. Crude inventories at Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is delivered, rose to a record high last week, according to the Energy Department. “We’re still in this phase of deleveraging,” said Tobias Merath, head of commodity research at Credit Suisse Group AG in Zurich. “We’re seeing concerns about the bail-out package. With the European sovereign debt problems, banks need to reduce their risky activities. What’s also getting everyone’s attention is the development in the inventories.” Crude oil for June delivery fell as much as $1.68, or 2.3 percent, to $72.72 a barrel, in electronic trading on the New York Mercantile Exchange. That’s the lowest price since Feb 12. The contract was at $72.95 at 11:35 a.m. London time, putting its decline this week at 2.9 percent. Yesterday, it lost 1.7 percent to $74.40, the lowest settlement since Feb. 12. Brent crude oil for June settlement, which expires today, was down $2.01 at $78.10 on the London-based ICE Futures Europe exchange. The more actively traded July Brent future was down $1.65 a barrel at $79.78. Sovereign Debt “What has been really driving the turmoil really is the uncertainty regarding the euro-zone sovereign-debt crisis,” said Victor Shum, a senior principal at U.S. energy consultants Purvin & Gertz Inc. in Singapore. “Investors are trying to make sense whether the bailout package that was announced at the beginning of the week really would have any substantive bite. Lately a lot of doubt has been raised.” Portugal announced yesterday austerity measures, a day after Spain proposed to reduce its deficit, spurring concern that fiscal tightening in the region will undermine economic growth and derail the global recovery. Oil has fallen more than 15 percent on the Nymex since it reached $87.15 a barrel on May 3, a 19-month high, as the euro weakened against the dollar. The U.S. currency slipped to $1.2457 against the euro at 11:37 a.m. in London, compared with $1.2535 in New York yesterday. Crude stockpiles at Cushing increased 784,000 barrels last week to 37 million, the highest since the Energy Department started keeping records at the storage hub in April 2004. Widening Contango Total crude oil inventories in the U.S. gained 1.95 million barrels to 362.5 million, the 14th stock build in 15 weeks, as refiners cut processing rates, the department’s report showed. Supplies were 6.1 percent above the five-year average for that period, compared with 5.4 percent the previous week. New York oil for June delivery traded at $4.56 a barrel below the July contract, near the widest divergence between front-month futures since Feb. 12, 2009. The spread between June and December climbed to $10.50. A widening discount, or contango, favors the storing of supplies. Oil may rise next week on speculation the dollar will drop against the euro as the European Union’s bailout of almost $1 trillion comes into effect, a Bloomberg News survey showed. Twenty-four of 46 analysts and traders, or 52 percent of them, forecast futures will increase through May 21. Fourteen respondents, or 30 percent, predicted prices will be little changed and eight said the market will decline. Last week, 50 percent of survey respondents said oil would rise. To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net

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