By Ben Sharples and Yee Kai Pin Aug. 11 (Bloomberg) -- Crude oil fell for a second day after China’s industrial output grew the least in 11 months and the productivity of U.S. workers dropped in the second quarter, adding to signs the economic recovery is faltering. Oil dropped 1.5 percent yesterday as the Labor Department said the U.S. lost momentum heading into the second year of the recovery from the recession. China’s industrial production rose 13.4 percent in July from a year earlier, the fourth month output slowed, as the government cracked down on real-estate speculation, curbed credit and closed factories to meet energy- efficiency targets. “Sentiment in the U.S. is somewhat mixed,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. “I still think we’re in dire shape.” Crude for September delivery fell as much as 74 cents, or 0.9 percent, to $79.51 a barrel in electronic trading on the New York Mercantile Exchange. It was at $79.53 at 3:02 p.m. Singapore time. Yesterday, the contract declined $1.23 to $80.25, the lowest settlement since July 30. Futures have climbed 15 percent in the past year. The Labor Department’s measure of employee output per hour decreased at a 0.9 percent annual rate, the first drop since the end of 2008. The median forecast of economists surveyed by Bloomberg News projected a 0.1 percent gain. Oil Processing China’s daily crude processing fell 3 percent last month from a record in June as the economy cooled. Oil processing reached 35.28 million metric tons in July, or about 8.34 million barrels a day, compared with 8.64 million barrels in June, data released by China Mainland Marketing Research Co. showed today. Volumes rose 6.7 percent from a year earlier, the slowest pace since April 2009, according to the research company that compiles data for the government. Crude, up 0.3 percent so far this year, pared losses yesterday after the Federal Reserve announced its first attempt since March 2009 to bolster growth in the U.S. Policy makers will maintain holdings of securities to prevent money from being drained out of the financial system and to keep the slowing U.S. economy from relapsing into recession. The Fed will reinvest principal payments on its mortgage assets into long-term Treasury securities. Brent crude for September settlement fell as much as 83 cents, or 1 percent, to $78.77 a barrel on the London-based ICE Futures Europe Exchange. It was at $78.79 at 3:03 p.m. Singapore time. Yesterday, the contract declined $1.39, or 1.7 percent, to $79.60, the lowest settlement this month. Atlantic Storm Governor Bobby Jindal declared a state of emergency for Louisiana, including New Orleans, on concern a tropical depression in the Gulf of Mexico may build into a bigger storm that will slam into the coast as early as Wednesday night. The storm is expected to delay by two or three days BP Plc’s efforts to plug the damaged Macondo well in the Gulf, source of the worst offshore oil spill in U.S. history, Commander Thad Allen told reporters yesterday. U.S. crude stockpiles fell 2.2 million barrels to 352.7 million in the week ended Aug. 6, the industry-funded American Petroleum Institute said yesterday. An Energy Department report today may show inventories dropped 2 million barrels, according to the median estimate from 18 analysts surveyed by Bloomberg News. Gasoline supplies declined 1.5 million barrels to 223.5 million, the API said. The Energy Department report may show stockpiles rose 250,000 barrels, based on the Bloomberg News poll. Distillate fuel inventories, including heating oil and diesel, gained 2.3 million barrels to 165.7 million, according to the API. That’s the fifth weekly increase and the highest level since the week ended Jan. 8. The Energy Department report may show an increase of 1.75 million, according to the Bloomberg News survey. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Yee Kai Pin in Singapore at kyee13@bloomberg.net

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