Oil futures tumbled after a U.S. government report showed a bigger-than-expected increase in supplies of crude oil, gasoline and distillate fuel. Inventories of crude oil rose 6.68 million barrels to 325.4 million barrels last week, the highest since May, the Energy Department said today in a weekly report. Supplies were forecast to increase by 800,000 barrels, according to the median of forecasts by 14 analysts in a Bloomberg News survey. “It’s difficult to find anything in this report that would give the bulls solace,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. Crude oil for February delivery fell $3.18, or 6.6 percent, to $45.40 a barrel at 11:49 a.m. on the New York Mercantile Exchange. Prices are down 52 percent from a year ago. The contract traded at $47.04 a barrel before the release of the report at 10:30 a.m. in Washington. The price of oil for delivery next December is 32 percent more than for February, increasing the opportunity for traders to profit. This price structure, in which the subsequent month’s price is higher than the one before it, is known as contango. Contango trading encourages companies to increase stockpiles if they have available storage. Inventories at Cushing, Oklahoma, where oil that’s traded on Nymex is stored, climbed 14 percent to 32.2 million barrels last week, the highest since at least April 2004, when the department began keeping track of supplies there. ‘Near the Limit’ “Given the contango, it pays to put oil in storage,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “Nobody knows for sure how much storage there is at Cushing, but we are near the limit.” Gasoline inventories rose 3.33 million barrels to 211.4 million barrels, the department said. Supplies were forecast to increase by 1 million barrels. Distillate supplies, which include heating oil and diesel, climbed 1.79 million barrels to 137.8 million barrels. A gain of 1.1 million barrels was forecast. Imports of crude oil increased 13 percent to 10.5 million barrels a day last week, the biggest one-week gain since the week ended Oct. 3, when the Gulf Coast was recovering from hurricanes Gustav and Ike. Refineries operated at 84.6 percent of capacity last week, up 2.1 percentage points from the week before, the report showed. Analysts forecast that there would be no change in utilization. Geopolitical Conflict Yesterday, crude reached a five-week high on the conflict between Israel and Hamas in the Gaza Strip, Russia’s gas dispute with Ukraine, and signs that OPEC members are enacting supply cuts. It later fell as manufacturing data indicated the U.S. recession is deepening. “The violence in Gaza and the natural-gas crisis in Europe aren’t enough to keep the rally going when the economy is so weak,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. “It looks like the $50 area will be the top of our range.” Brent crude oil for February settlement declined $2.14, or 4.2 percent, to $48.39 a barrel on London’s ICE Futures Europe exchange. Saudi Foreign Minister Prince Saud al-Faisal said oil “isn’t a weapon” to end fighting in the Middle East. Prince al- Faisal, speaking at a press conference in New York, said oil “can’t reverse a conflict,” when asked about an Iranian call for Arab states to stop producing as a means of putting pressure on countries backing Israel. Oil surged in 1974, helping spur a recession in the developed world, after an oil embargo that followed the Arab-Israeli war in October 1973. Floating Storage Frontline Ltd., the world’s biggest owner of supertankers, said oil traders want to charter as many as 10 vessels to hold crude to take advantage of higher prices later in the year. About 25 supertankers were already hired for storage and there are inquiries for 5 to 10 more, Jens Martin Jensen, Singapore-based interim chief executive officer of the company’s management unit, said by phone today. Prices also dropped on concern that fuel demand will decline because of the recession in the U.S., Europe and Japan. Companies in the U.S. eliminated an estimated 693,000 jobs in December, the most since records began in 2001, a report based on payroll data showed. The drop in the ADP Employer Services gauge was larger than estimated by economists in a Bloomberg News survey. German unemployment rose for the first time in almost three years in December as the labor market caught up with an economy that shrank during most of 2008. The number of people out of work, adjusted for seasonal swings, rose 18,000 to 3.18 million last month, the Nuremberg-based Federal Labor Agency said today.

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