By Ann Koh and Ben Sharples May 4 (Bloomberg) -- Crude oil dropped below $86 a barrel, ending four days of gains on analyst forecasts that U.S. crude supplies increased last week and concern the debt crisis in Greece will spread and damp fuel demand. Crude inventories in the U.S. probably rose for the 13th time in 14 weeks as imports climbed, according to a Bloomberg News survey before an Energy Department report tomorrow. Inventories probably increased 1.7 million barrels in the seven days ended April 30 from 357.8 million a week earlier, according to the median of nine analyst estimates. The European Central Bank may have to consider other steps to prevent Greece from bringing down the euro, economists said. “Crude oil stocks have been gaining in the past weeks, it’s a result of imports,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The Eurozone debt issue will continue to drive volatility in oil.” Crude oil for June delivery fell as much as 38 cents, or 0.4 percent, to $85.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $85.87 at 12:34 p.m. in Singapore. Yesterday, prices gained 4 cents to close at $86.19 on the New York Mercantile Exchange. Front-month Brent futures’ premium to WTI prices was at $2.75 a barrel yesterday, from $1.29 on April 30. Fuel Supplies Oil rose as much $1 a barrel yesterday after the Institute for Supply Management’s factory index increased to 60.4, the highest level since June 2004. Economists projected a gain to 60, according to a Bloomberg News survey. “I don’t think this is a fair value for crude at the moment given the fundamentals,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “Crude stocks are very high.” Stockpiles of distillate fuel, a category that includes heating oil and diesel, probably rose 1.8 million barrels from 151.8 million the prior week, according to the Bloomberg News survey. Gasoline inventories may have gained 100,000 barrels. “Distillates are way above where they probably should be at this time of the year,” said National Australia Bank’s Westmore. Refineries probably operated at 89 percent of capacity, up 0.1 percentage point from the previous week, according to the median of analyst responses. Imports of crude oil increased 0.7 percent to 9.68 million barrels a day in the week ended April 23, the highest level since September, the department said last week. European Debt Concern European Central Bank President Jean-Claude Trichet yesterday diluted rules for the second time in a month to guarantee the ECB will keep taking Greek government bonds as collateral for loans. The central bank may have to extend that to other nations, renew a program of lending unlimited cash to banks for a year, and even start buying government debt if the 110 billion-euro ($146 billion) bailout plan for Greece fails to stem the euro’s slide, economists said. “The ECB has to stand ready to do more,” said Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam. The 16-nation euro traded at $1.3201 against the dollar at 11:54 a.m. in Singapore. Brent crude for June settlement traded at $88.54 a barrel, down 45 cents, on the ICE Futures Europe exchange in London at 12:35 p.m. Singapore time. Yesterday, the contract climbed $1.50, or 1.7 percent, to end the session at $88.94. To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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