By Christian Schmollinger and Ben Sharples May 25 (Bloomberg) -- Crude oil declined, falling below $70 a barrel in New York, after the seizure of a Spanish bank fueled concern Europe’s debt crisis may spread. Oil dropped for the first day in three as the euro weakened against the dollar, reducing the investment appeal of commodities. U.S. supplies of crude oil probably rose for the 16th time in 17 weeks amid ample imports, according to analysts surveyed by Bloomberg News before a government report tomorrow. “Speculators are shifting money from risky to non-risky assets,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo. “From a fundamental point of view, inventories are high so that could push prices further down but crude oil is really going to be driven by the euro issue.” Crude oil for July delivery fell as much as $1.32, or 1.9 percent, to $68.89 a barrel in electronic trading on the New York Mercantile Exchange. It was at $68.98 at 1:37 p.m. Singapore time. Yesterday, the contract rose 17 cents, or 0.2 percent, to settle at $70.21 a barrel. Futures rose yesterday on speculation that China may delay economic tightening measures and on signs that U.S. economic growth will accelerate. Europe’s debt crisis has undermined that optimism, pushing the region’s common currency lower. The dollar rose to $1.2302 per euro from $1.2372 yesterday. The euro fell against all of its most-traded counterparts after the Bank of Spain said on May 22 it appointed a provisional administrator to run CajaSur, a savings bank crippled by property-loan defaults. ‘European Uncertainty’ Brent crude oil for July settlement fell as much as $1.30, or 1.8 percent, to $69.87 a barrel on the London-based ICE Futures Europe exchange. It was at $69.95 a barrel at 1:37 p.m. Singapore time. Yesterday, the contract slipped 51 cents, or 0.7 percent, to $71.17. “I don’t think things have worsened in Europe in the past few days, but the reason we haven’t seen any significant rallies in the market is that the uncertainty hasn’t dissipated,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “The one thing about the euro zone is that everyone has been revising down their demand outlook. The fundamentals there have no doubt become weaker in the last month.” U.S. crude stockpiles rose 250,000 barrels in the seven days ended May 21 from 362.7 million the previous week, according to the median of 13 analyst estimates before tomorrow’s Energy Department report. Seven of the respondents forecast a gain and six estimated a decline. Refineries probably operated at 87.9 percent of capacity last week, unchanged from the previous week, according to the median of analyst responses. Refineries operated at 89.6 percent of capacity in the week ended April 30, the highest level since May 2008. Crude oil options rose. The implied volatility for at-the- money options expiring in 30 days, a measure of expected price swings in futures and a key gauge of options prices, was at 42.18 percent today, up from 41.97 percent yesterday. To contact the reporter on this story: Christian Schmollinger in Singapore at Christian.s@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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