Oil declined for a third day in London as investors bet China will step up efforts to cool its economy, tempering fuel demand in the world’s biggest energy consumer. Oil slipped as the dollar strengthened against the euro, undermining the appeal of riskier assets, and as the International Energy Agency proceeded with its first release of emergency fuel supplies in six years. The People’s Bank of China said yesterday the country still faces “large” inflationary pressure and the central bank will maintain a “prudent” monetary policy. “The near-term upside potential is capped by the IEA reserve release and China growth fears,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna. “However, I don’t see prices correcting too much as the IEA release makes it less necessary for Saudi Arabia to expand their production by the full 1 million barrels announced last month.” Brent oil for August settlement was at $110.92 a barrel on the London-based ICE Futures Europe exchange, down 47 cents. The European benchmark contract was at a premium of $16.24 to U.S. futures. The spread reached a record $22.29 on June 15. On the New York Mercantile Exchange, crude for August delivery was at $94.66 a barrel in electronic trading, down 28 cents, at 9:05 a.m. London time. Floor trading was closed yesterday for the U.S. Independence Day holiday. Yesterday’s electronic trades will be booked with today’s transactions for settlement purposes. Futures are up 31 percent in the past year. Brent Oil So-called long positions in Brent dropped to 87,831 contracts in the week ended June 28, from 89,058 in the previous week, ICE Futures said yesterday. Bets on rising prices still outnumbered those on declines by 38,530 contracts, the data showed. That’s down from 39,391 for the week to June 21. Chinese lenders may have greater exposure to bad local- government loans than anticipated, Moody’s Investors Service said. Bank loans to local governments are about 3.5 trillion yuan ($540 billion) more than official estimates, and the credit outlook for the industry could decline, Moody’s said. New York futures fell 4.6 percent on June 23 after the International Energy Agency, an adviser to 28 oil-consuming nations, said its members will release 60 million barrels of crude and oil products. The Organization of Petroleum Exporting Countries on June 8 failed to agree to raise production to make up for a supply shortfall in Libya. OPEC’s 12 members pump about 40 percent of the world’s crude. Moving Average Oil in New York continues to face chart resistance around $96 a barrel, according to data compiled by Bloomberg. The August contract last week traded near the 200-day moving average and has yet to settle above it. A breach of technical resistance usually means prices will rise further. The sale of U.S. emergency crude reserves as part of the IEA’s program has been “very successful” based on awards announced last week, according to the Paris-based agency. “The initial signs from the U.S. this time around are looking good so we would hope that a very sizeable proportion of this would be taken up,” David Fyfe, the IEA’s head of oil industry and markets division, said yesterday. Orders placed with U.S. factories rebounded in May after falling in April by the most in almost a year, according to a Bloomberg News survey before a Commerce Department report today. Factory orders probably increased 1 percent from minus 1.2 percent, according to the median estimate of 52 economists. The services industries, which cover about 90 percent of the U.S. economy, are expected to have expanded at a reduced pace in June, a report from the Institute for Supply Management may show tomorrow. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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