Oil fell for the fifth time in six days before a government report that may show U.S. refineries operated at their lowest rate in five months, signaling less demand for crude to process into fuels. Refineries ran at 86.8 percent of capacity last week, the Energy Department will report tomorrow, based on the median estimate of 16 analysts in a Bloomberg News survey. Petroleum supplies in the U.S., the world’s largest oil consumer, are near the highest level in 20 years. “We’re seeing some reluctance from the refinery sector to buy crude, given high product stocks,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We’re still waiting to get some news which suggests we’re getting a recovery.” Crude for October delivery dropped $1.71, or 2.3 percent, to $73.15 a barrel at 11:28 a.m. on the New York Mercantile Exchange. The contract expires at the close of floor trading today. The more active November futures lost $1, or 1.3 percent, to $75.19. U.S. crude supplies probably slipped 1.7 million barrels from 357.4 million, according to the survey. Gasoline stockpiles were unchanged at 224.5 million, and stockpiles of distillate fuel, including heating oil and diesel, grew by 200,000 barrels last week, the first increase in four weeks, the survey showed. The industry-funded American Petroleum Institute will release its weekly report on supply and demand later today. Overall Supplies Dip Overall petroleum supplies, a combination of oil and other fuels, slipped 0.3 percent last week from a 20-year high to 1.14 billion barrels. Inventories rose for the prior 13 weeks. Federal Reserve policy makers are gathering in Washington today, a day after the National Bureau of Economic Research said the longest and deepest U.S. recession since the Great Depression ended in June 2009. The Federal Open Market Committee is scheduled to release a policy statement at around 2:15 p.m. in Washington. “All eyes are on the FOMC meeting today,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “We do not think they will call for quantitative easing today, but lay the groundwork for November.” Payrolls dropped in 36 U.S. states in August, indicating the labor market will take time to rebound from the recession, figures from the Labor Department showed today in Washington. Housing Starts Rise Housing starts increased more than forecast in August, as builders began work on 598,000 homes, at an annual rate. That’s up 10.5 percent and the most since April, according to the Commerce Department. Estimates for August starts in the Bloomberg survey of 74 economists ranged from 505,000 to 600,000 after a previously reported 546,000 a month earlier. Brent crude oil for November settlement lost 49 cents to $78.83 on the London-based ICE Futures Europe exchange. Brent’s premium to the New York November contract climbed to $3.64 a barrel today from $3.13 yesterday. The price spread has widened as growing U.S. inventories and the restart of an Enbridge Energy Partners LP crude pipeline weighed on New York futures. U.S. oil supplies were 13 percent above the five-year average in the week ended Sept. 10, according to the Energy Department. The supply situation has also made Nymex prices for near- term delivery less expensive than the cost of oil in future months, a condition known as contango. Enbridge started its 6A oil pipeline, the largest conduit linking Canada and to refiners in the Midwest, on Sept. 17 after a leak in Illinois on Sept. 9 shut the line. “The restart of Enbridge pipeline supplies to the Midwest has restored crude supplies from Canada, and WTI November futures have rapidly slumped to a fresh record discount against the corresponding Brent futures,” Lawrence Eagles, head of commodities research at JPMorgan Chase & Co. in New York, said in a report today. To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net. To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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