Crude oil fell in New York after U.S. crude inventories gained more than expected last week and refiners reduced output as demand declined. Crude oil stockpiles for the week ended Jan. 23 climbed 1.9 percent to 338.8 million barrels, the highest since August 2007, the Energy Department said yesterday. Supplies at Cushing, Oklahoma, where oil traded on Nymex is delivered, remained at a four-year high. U.S. Federal Reserve officials warned of a prolonged global economic slowdown that may push the U.S. to the brink of deflation. “In the U.S., we don’t see any sign of a recovery in the next few months,” said Neil Atkinson, an analyst at KBC Market Services in London. “All the stimulus packages in the world don’t take effect overnight.” Crude oil for March delivery fell as much as $1.34, or 3.2 percent, to $40.82 a barrel on the New York Mercantile Exchange. The contract was at $41.05 a barrel at 12:14 p.m. London time. Prices are down 7.8 percent this year and are 55 percent lower than a year ago. Supplies at Cushing climbed 0.9 percent to 33.5 million barrels last week, the highest since at least April 2004, when the department began keeping records. The area can hold 47.7 million barrels, according to Lipow Oil Associates LLC. “The situation in the U.S. is still one of high stocks in general and very high stocks at Cushing,” said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland. “For now, prices will stay in a pretty narrow range.” ‘Too Low The Organization of Petroleum Exporting Countries won’t hesitate to cut output further if prices keep falling, the group’s Secretary General Abdalla el-Badri said at the World Economic Forum today in Davos, Switzerland. Current prices below $50 a barrel are “too low” because they don’t allow producers to invest in expanding capacity, he said. For the first time during the credit crisis, the Federal Open Market Committee’s statement yesterday indicated concern about the worldwide economy weakening “significantly,” with “some risk” that inflation would remain below ideal rates. U.S. refineries operated at 82.5 percent of capacity last week, down from 83.3 percent. Output fell as companies announced shutdowns for maintenance to switch their production from heating oil to gasoline ahead of the peak motor fuel demand period starting May. Analysts had forecast that processors would operate at 82.8 percent of capacity. ConocoPhillips, the second-largest U.S. refiner, expects refinery operating rates near 80 percent during the first quarter due to planned turnarounds and hydro-skimming economics. Possible Strike Crude and motor fuel prices rose yesterday after gasoline supplies fell 121,000 barrels to 219.9 million barrels last week, the U.S. Energy Department said. Inventories were forecast to climb 2 million barrels, according to the median estimate in a Bloomberg survey. Exxon Mobil Corp. and Royal Dutch Shell Plc are preparing to keep their U.S. plants running should the United Steelworkers union call a strike that could affect almost two-thirds of the country’s refining capacity. Refiners and the union are negotiating this week on a new labor contract for about 30,000 workers. The current agreement expires at 12:01 a.m. on Feb. 1, and members have already authorized the union to call a strike. BP Plc, Europe’s second-largest oil company, said yesterday it may shut four U.S. refineries that can process 1.3 million barrels a day of crude oil if the steelworkers’ union goes on strike. The company doesn’t expect a shutdown because of progress in the negotiations, spokesman Scott Dean said. Brent crude oil for March settlement fell as much as 90 cents, or 2 percent, to $44 a barrel on London’s ICE Futures Europe exchange. It was at $44.45 a barrel at 12:13 p.m. London time. The contract yesterday increased $1.17, or 2.7 percent, to settle at $44.90 a barrel.

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