Crude oil fell after a U.S. government report showed that crude stockpiles climbed to a 16 month high as fuel demand tumbled. Inventories of crude increased 1.14 million barrels to 326.6 million last week, the highest since August 2007, the Energy Department said. Supplies of gasoline and distillate fuel also rose. Fuel demand dropped 6 percent to an average 18.6 million barrels a day, the largest one-week decline since February 2004. “There is not one bullish element in this report,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Demand is poor. Even with cold weather refiners are producing more fuel than is needed.” Crude oil for February delivery fell $2.11, or 5.6 percent, to $35.67 a barrel at 11:13 a.m. on the New York Mercantile Exchange. Prices touched $35.52, the lowest since Dec. 24. Futures are down 62 percent from a year ago. Oil traded at $37.23 a barrel before the release of the report at 10:30 a.m. in Washington. Inventories of crude oil were forecast to rise 2.5 million barrels in the week ended Jan. 9, according to the median of 15 analyst estimates in a Bloomberg News survey. Gasoline inventories rose 2.07 million barrels to 213.5 million barrels, higher than the 1.85-million-barrel increase in the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, surged 6.35 million barrels to 144.2 million barrels, the biggest gain since January 2004. Retail Sales Prices also dropped on concern that fuel demand will decline because of the recession in the U.S., Europe and Japan. Sales at U.S. retailers fell more than twice as much as forecast in December as job losses and the choking-off of credit led Americans to cut back on everything from eating out to car purchases. The 2.7 percent decrease, the sixth consecutive drop, extended the longest series of declines in records going back to 1992, the Commerce Department said today in Washington. Purchases excluding automobiles slumped 3.1 percent. Global oil demand will average 85.1 million barrels a day this year, down 810,000 barrels from 2008, according to an Energy Department report yesterday. “Producers are trying to catch up with what appears to be an accelerating decline in demand,” said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta. Brent crude oil for February settlement declined 93 cents, or 2.1 percent, to $43.90 a barrel on London’s ICE Futures Europe exchange. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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