Aug. 27 (Bloomberg) -- Crude oil is headed for its third weekly decline as a slowdown in U.S. manufacturing added to concern that the economic recovery is faltering. Oil pared losses as Japan pledged to take action to jump start a slowing economy. Prices are set for a drop this week after gains in U.S. crude inventories, which climbed more than expected last week. “The oil market is very bearish,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “The fundamental picture is just not positive at all. If oil breaks $70, it will come under pressure and then you’ll see it substantially lower.” Crude oil for October delivery dropped as much as 49 cents, or 0.7 percent, to $72.87 a barrel in electronic trading on the New York Mercantile Exchange, and was at $73.23 at 2:54 p.m. Singapore time. Yesterday, the contract rose 84 cents, or 1.2 percent, to $73.36 a barrel. Prices have dropped 0.7 percent this week and 8 percent since the start of the year. Japan’s Prime Minister Naoto Kan will speak today on his policies to fight deflation and curb the yen’s strength. His economic ministers will meet to discuss the policies, including strengthening ties with the Bank of Japan, Chief Cabinet Secretary Yoshito Sengoku told reporters in Tokyo. Inventory Gains U.S. petroleum stockpiles, a combination of oil and fuel supplies, climbed 8.92 million barrels last week, to 1.14 billion, the highest level in at least 20 years, according to the Energy Department report. Crude stockpiles rose 4.11 million barrels to 358.3 million barrels last week, the Energy Department said. Inventories were forecast to climb 300,000 barrels. The Standard & Poor’s 500 Index declined 0.8 percent in New York and the Dow Jones Industrial Average dropped 0.7 percent yesterday, the lowest close since July 6 for both gauges. OPEC Cuts The Organization of Petroleum Exporting Countries will reduce crude shipments by 0.3 percent to the middle of next month as refiners cut imports while they conduct maintenance, tanker-tracker Oil Movements said yesterday. OPEC, which supplies about 40 percent of the world’s crude oil, will ship 23.38 million barrels a day in the four weeks to Sept. 11, down from 23.45 million in the month to Aug. 14, the Halifax, England-based consultant said yesterday in a report. The data exclude Ecuador and Angola. Brent crude oil for October settlement fell as much as 52 cents, or 0.7 percent, to $74.50 a barrel on the London-based ICE Futures Europe Exchange, and was at $74.79 at 2:56 p.m. Singapore time. Yesterday, the contract rose $1.54, or 2.1 percent, to settle at $75.02. --With assistance from Ben Sharples in Melbourne. Editors: John Viljoen, Jane Lee. To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net To contact the editor responsible for this story: Clyde Russell in Singapore at crussell7@bloomberg.net

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