Crude oil fell to the lowest in a week on speculation that OPEC will maintain production targets this week even as the global recession curbs fuel demand. OPEC is unlikely to change output quotas at its May 28 meeting, and talk of overly high inventories is exaggerated, said a Persian Gulf oil official with knowledge of the matter. German exports and company spending plunged in the first quarter, dragging Europe’s largest economy into its deepest slump on record. “The fundamental situation is very weak; demand in the U.S. is just collapsing,” Eliane Tanner, an analyst at Credit Suisse Group AG said in a television interview from Zurich. “The market is already pricing in a no-change scenario” with regard to OPEC. Crude oil for July delivery fell as much as $2.14, or 3.5 percent, to $59.53 a barrel on the New York Mercantile Exchange, and was at $59.85 at 11:50 a.m. in London. The exchange will combine yesterday and today’s trading for settlement purposes because U.S. floor trading was shut yesterday for Memorial Day. The dollar rose against the euro for the first time in seven days after Britain’s Telegraph newspaper cited a German banking regulator as saying debt at the nation’s biggest lenders may increase. A stronger dollar limits investors’ need for assets to hedge against inflation such as commodities. The euro declined to $1.3888 as of 11:28 a.m. in London, from $1.4017 yesterday in New York. Bearish Expectation Crude oil inventories held by the 28 nations advised by the International Energy Agency rose to 62 days of demand in the first quarter, according to the agency’s report on May 13. That is up from 54 days in the year-earlier period and from 58 days in the fourth quarter of 2008. “The expectation that OPEC won’t change its output quotas can be viewed as bearish because inventories are indeed high,” said Victor Shum, a senior principal at oil industry consultants Purvin & Gertz Inc. in Singapore. “Most traders do feel that the fundamentals aren’t supportive of the current level of pricing. That’s adding to the downward pressure.” Still, charts suggest prices may resume their rally. Oil in New York may rise to $77 a barrel in coming months as futures contracts “correct” the decline from a record $147.27 in July, according to technical analysis from MF Global. Oil may first climb to $71.75 a barrel, the level reached on Nov. 4, P.A. Rajan, a Singapore-based technical analyst at MF Global, said in a telephone interview yesterday. Crude could reach $77, near the so-called Fibonacci retracement of 38.2 percent of oil’s decline from the July record. Unsustainable Rally “An overhang of inventories built up at sea and continuously poor economic data encourages selling because the rally looks unsustainable,” said Harry Tchilinguirian, BNP Paribas’s senior oil-market analyst in London. Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, wants the group to “stay the course” when it reviews quotas at this week’s meeting, Oil Minister Ali al-Naimi said on May 24. Saudi Arabia is producing more crude than its OPEC quota, according to data from the Joint Oil Data Initiative, citing figures submitted by the country. OPEC, responsible for 40 percent of global crude supply, is likely to keep output quotas unchanged for a second time this year as recovering oil prices forestall the need for new cuts, according to a Bloomberg survey published on May 22. At the last summit on March 15, the group decided to leave quotas unchanged and adhere to its commitment to restrict supply. Brent crude for July settlement fell as much as $1.80, or 3 percent, to $58.41 a barrel and was at $58.90 a barrel at 11:30 a.m. on London’s ICE Futures Europe exchange.

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