Oil declined for a fifth day on speculation U.S. crude and fuel inventories rose last week, signaling weaker demand amid signs economic growth is slowing. Oil dropped to the lowest in almost seven weeks yesterday as investors sought the relative safety of the dollar over the euro before a report that may show U.S. home sales slumped in July. U.S. crude supplies probably increased last week while distillate fuel stockpiles may hit the highest in 27 years, according to a Bloomberg News survey. “The price of oil dropped again, showing investor uncertainty over the future of the global economy, mainly that of the U.S.,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. “There just isn’t much positive in the news.” Crude for October delivery fell as much as 68 cents, or 0.9 percent, to $72.42 a barrel in electronic trading on the New York Mercantile Exchange. It was at $72.45 at 2:25 p.m. Singapore time. Yesterday, the contract lost 72 cents, or 1 percent, to $73.10, the lowest settlement price since July 6. Futures have fallen 8.6 percent since the start of the year. The dollar rose to $1.2648 per euro at 2:26 p.m. in Singapore, from $1.2657 yesterday, after reaching $1.2621, the highest since July 13. A stronger U.S. currency reduces investor appetite for commodities as a hedge against inflation. Forecasts show sales of existing U.S. homes dropped 13.4 percent in July and gross domestic product growth slowed to a 1.4 percent annual pace in the second quarter, down from 2.4 percent last month. Demand Decline “The U.S. housing market is looking weak as well as the unemployment picture,” Sander said. “Labor Day weekend is coming in two weeks, which signals the end of the summer driving season, so consumption could take a hit in the coming month.” Oil demand typically declines in the third quarter as the peak U.S. summer ends and refiners shut down plants for scheduled maintenance. Deliveries of gasoline, a measure of demand, were little changed at an average 9.257 million barrels a day in July, compared with 9.26 million in July 2009, the industry-funded American Petroleum Institute reported Aug. 20. It was the second-lowest July demand number since 2003. Supplies of the distillate fuels rose 1 million barrels, or 0.6 percent, in the seven days ended Aug. 20 from 174.2 million a week earlier, according to the median of 13 analyst estimates before an Energy Department report tomorrow. The last time stockpiles were so high was January 1983, two months after the U.S. exited a recession. U.S. oil supplies probably increased 500,000 barrels last week from 354.2 million in the prior week, based on the median estimate from 13 analysts surveyed by Bloomberg News before an Energy Department report tomorrow. Gasoline inventories probably dropped 300,000 barrels. Brent Premium Brent crude for October delivery lost as much as 51 cents, or 0.7 percent, to $73.11 a barrel on the London-based ICE Futures Europe Exchange. It was at $73.15 at 2:25 p.m. Singapore time. Yesterday, the contract fell 0.9 percent to settle at $73.62 a barrel. Brent October futures are trading at a premium of 68 cents a barrel to West Texas contracts in New York at 2:29 p.m. Singapore time. The European grade has been above the U.S. benchmark since Aug. 17. “The current relative strength in Brent comes against a weak set of WTI fundamentals and these weak fundamentals stand a good chance of lasting,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said in a note yesterday. Brent’s premium may remain for awhile amid maintenance in the North Sea fields that underlie the contract and the high level of U.S. inventories, according to the note. “We can safely say that Brent’s premium stands to live another day,” Tchilinguirian said. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net

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