Supplies rose 1.3 million barrels, or 0.4 percent, in the seven days ended Aug. 27 from 358.3 million a week earlier, according to the median of 14 analyst estimates before an Energy Department report tomorrow. The gain would leave stockpiles at the highest level since July 23. “These inventory numbers are getting too big to ignore, particularly because this is the case across the board,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “At the very least they will present the market with a strong headwind.” Prices may drop as stockpiles approach the 2010 high of 365 million reached on May 21. Demand is set to decline during the next two months as refineries idle units to perform seasonal maintenance. Operating rates touched their annual low in September for three of the past six years. The U.S. Commerce Department lowered its estimate for gross domestic product in the second quarter on Aug. 27 to an annual pace of 1.6 percent from an initially reported 2.4 percent. Consumer incomes climbed 0.2 percent in July, less than economists projected, and the savings rate dropped, the department said yesterday. Crude for October delivery fell 77 cents, or 1 percent, to $73.93 a barrel at 9:42 a.m. on the New York Mercantile Exchange. They are poised to lose 6.4 percent in August. Futures touched this year’s high of $87.15 on May 3, then plunged 26 percent to a low of $64.24 17 days later. Cutting Bets Hedge funds and other large speculators cut bets on rising prices by 28 percent in the week ended Aug. 24, the most since July 6, according to a Commodity Futures Trading Commission report on Aug. 27. It was the third straight decline. Ten of the Bloomberg survey respondents forecast an increase in oil supplies. Inventories of distillate fuel, a category that includes heating oil and diesel, probably climbed 1.1 million barrels, or 0.6 percent, from 176 million, the survey showed. Stockpiles in the week ended Aug. 20 were the highest since 1983. “We’re looking at the highest inventory levels in a generation,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “You have to go back at the early years of Ronald Reagan’s administration to find distillate supplies this high.” Inventories Increase U.S. stockpiles of oil and fuel climbed 8.9 million barrels to 1.14 billion in the week ended Aug. 20, the highest level since at least 1990, when the Energy Department began to collect weekly data. On a monthly basis, supplies are at the highest level since October 1983. Inventories have risen for eleven weeks, the longest stretch since July 2007. “The important question is how high inventories can go before the market pays attention,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “A sizable build in stocks coupled with further signs of an economic slowdown may pierce the bullish price bubble we’ve seen.” Refineries probably operated at 87.7 percent of capacity, unchanged from the previous week, the survey showed. Operating rates slipped 2.3 percentage points to the lowest level since May in the week ended Aug. 20. U.S. refineries often shut units for maintenance in September and October as gasoline demand falls and before heating-oil use increases. They typically complete those operations during the winter, when distillate demand peaks. Labor Day “We’re going into a season where demand declines,” Schork said. “The Labor Day weekend is almost here and with it comes a drop in driving and cooling demand.” The driving season, when Americans traditionally take vacations, ends on Labor Day, which this year falls on Sept. 6. Gasoline inventories fell 375,000 barrels, or 0.2 percent, from 225.6 million, according to the poll. Stockpiles in the week ended Aug. 20 were 12 percent higher than the five-year average for the period, according to the Energy Department. The department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington. --With assistance from Margot Habiby in Dallas. Editors: Joe Link, Dan Stets To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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