By Grant Smith July 23 (Bloomberg) -- Crude oil for September delivery declined a second day in New York as rising U.S. fuel inventories dampened optimism for a swift rebound in demand. Gasoline and distillate fuel inventories in the U.S. rose in the week to July 17, the sixth consecutive increase, while crude supplies fell, according to an Energy Department report yesterday. Japan’s oil imports fell for an eighth month in June. “Demand is weak, and spare capacity is the largest it’s ever been,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. “The market is pricing in a demand recovery round the corner, but I don’t see it. We see more of an L-shaped recovery, with more job losses to come.” Crude oil for September delivery on the New York Mercantile Exchange fell as much as 57 cents, or 0.9 percent, to $64.83 a barrel and traded at $64.96 as of 12:59 p.m. in London. Prices are down 7 percent from an eight-month closing high of $71.60 a barrel on June 30. Japan’s oil imports fell 19 percent in June, according to a preliminary finance ministry trade report. The country’s refiners and power utilities cut output amid the recession, reducing demand in the world’s second-largest economy. “We do have more supply than demand given what’s happening with the global economy,” Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney, said in a Bloomberg Television interview. “It’s going to be a little bit difficult for oil to trade onwards and upwards for the time being.” U.S. crude stockpiles dropped 1.8 million barrels to 342.7 million, the Energy Department said in its Weekly Petroleum Status Report. This was less than a median 2.1 million-barrel decrease forecast by 15 estimates in a Bloomberg News survey. Gasoline supplies climbed 813,000 barrels to 215.4 million barrels, the highest since mid-April. “Supplies are more than adequate given the lack of apparent demand,” Stephen Schork, president of Villanova, Pennsylvania-based consultant Schork Group Inc., said in a note to clients. “Current draws are not demand driven, but rather a function of lower domestic production and fewer imports.” Brent crude for September settlement on London’s ICE Futures Europe exchange traded at $66.95 a barrel, down 26 cents, at 12:57 p.m. in London. To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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