Oil dropped from a three-day high as concern Europe’s debt crisis will worsen countered better-than- forecast U.S. retail sales and a drop in crude supplies in the world’s biggest consumer of the commodity. Futures fell as much as 0.3 percent after climbing the most in almost four weeks yesterday. EU finance ministers failed to reconcile a German-led push for bondholders to share the cost of a new Greek aid plan. Sales by U.S. retailers dropped 0.2 percent in May, less than the median forecast for a 0.5 percent decline, Commerce Department figures showed. Crude stockpiles fell 3.01 million barrels last week, the industry-funded American Petroleum Institute said. The economy has “hit a bit of a short-term patch of weakness but we still see the second half of the year as being pretty strong,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicted crude will average $113 a barrel in the third quarter. “Higher oil prices might be having a marginal impact on growth in the advanced economies.” Crude for July delivery traded at $99.06 a barrel, down 31 cents, in electronic trading on the New York Mercantile Exchange at 1:32 p.m. Sydney time. The contract gained $2.07, or 2.1 percent, to $99.37 yesterday in the biggest percentage increase since May 18. Prices are 29 percent higher the past year. Moody’s Review Brent oil for July delivery climbed 56 cents, or 0.5 percent, to $120.72 a barrel on the London-based ICE Futures Europe exchange. The more actively traded August contract fell 19 cents to $119.16. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet on June 17 in Berlin to try to resolve their differences on a rescue for Greece, which was downgraded this week to the world’s lowest credit rating by Standard & Poor’s. EU finance ministers agreed to convene again on June 19. BNP Paribas (BNP) SA, France’s biggest bank, and local rivals Societe Generale SA and Credit Agricole SA were today placed on review for possible downgrade by Moody’s Investors Service, which cited their holdings of Greek debt. Standard & Poor’s also cut its outlook for Chinese property developers to “negative” from “stable” on tighter credit and further government curbs on the industry. Oil prices are “hurting” the global economy and may stall its recovery, Fatih Birol, chief economist at the International Energy Agency, said yesterday. Gasoline ‘Pain’ The decline in U.S. retail sales was the first since June 2010. Excluding the biggest slide in auto sales in more than a year, purchases climbed 0.3 percent. “The report demonstrates that consumers continue to feel the pain of gasoline prices above the $3.50 mark,” said Stephen Schork, president of the The Schork Group Inc, an energy consultant in Villanova, Pennsylvania, in a note e-mailed today. U.S. crude stockpiles dropped to 363 million barrels, the lowest in seven weeks, according to the American Petroleum Institute report. Gasoline stockpiles climbed 1.13 million barrels to 213.5 million barrels, the API said. Oil-supply totals from the API and the Energy Department have moved in the same direction 72 percent of the time over the past year. The institute collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey. Brent Premium The Energy Department report today may say crude inventories slid 1.8 million barrels from 368.9 million, according to a Bloomberg News survey of 13 analysts. Gasoline supplies probably rose 1.05 million barrels, the survey shows. Brent, the European benchmark contract traded at a premium of $21.59 a barrel to U.S. futures today. The difference between front-month contracts in London and New York reached a record close of $21.80 on June 13. The gap is widening because of flows of light, sweet crude to Europe and Asia instead of the U.S. Gulf Coast, Goldman Sachs Group Inc. said in a note yesterday. The premium is “primarily driven by the weakening of U.S. Gulf Coast light-sweet crude oil prices relative to Brent crude, not a Cushing bottleneck,” Goldman analysts including New York-based David Greely said. In the past the gap was determined by excessive stockpiles at the U.S. storage hub in Cushing, Oklahoma, the latest divergence is more linked to shortages of blends similar to Brent crude, BNP Paribas SA said yesterday in a separate report. Supplies at Cushing slipped 1.02 million barrels to 38.9 million in the week ended June 3, the Energy Department said in a report last week. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

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