Oil fell, paring yesterday’s gains, on speculation that Greece’s referendum on a bailout agreement threatens to intensify the European debt crisis and derail the region’s economy. Futures slid as much as 1.5 percent after leaders in Europe severed aid payments to Greece and warned that the country will surrender all payments if it votes against a rescue package agreed to last week. Brent crude’s technical indicators are bearish in the near-term amid “significant” downside risks to demand, according to Standard Chartered Plc. U.S. oil and gasoline inventories rose more than forecast last week. “It was never a case where it was a free lunch for Greece,” said Selena Ling, head of treasury research at Oversea-China Banking Corp. in Singapore. “It was always, ‘you will get the money if you meet all conditions set out.’ If you look at the U.S., Europe and Japan, they’re not likely to be the key drivers of oil demand.” Crude for December delivery fell as much as $1.37 to $91.14 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.78 at 12:12 p.m. in Singapore. The contract gained 32 cents yesterday to close at $92.51, the highest settlement since Oct 31. Oil is up 0.4 percent this year. Brent for December settlement traded 59 cents lower at $108.75 a barrel on the London-based ICE Futures Europe exchange. Brent’s premium to New York crude was $17.34 a barrel, compared with $16.83 yesterday and a record $27.88 on Oct. 14. U.S. Stockpiles U.S. crude supplies increased 1.83 million barrels to 339.5 million in the week ended Oct. 28, the U.S. Energy department said yesterday. That was more than the 1 million barrels forecast by analysts in a Bloomberg News survey. Gasoline stockpiles gained 1.36 million barrels to 206.3 million. The median estimate was a decline of 800,000. Inventories of distillate fuels, which include heating oil and jet fuel, dropped 3.58 million barrels to 141.9 million. The median estimate was a decline of 1.75 million. Oil was also weigh down by data showing China’s non- manufacturing industries grew at a slower pace in October. A purchasing managers’ index fell to 57.7 from 59.3 in September, the China Federation of Logistics and Purchasing said on its website today. The gauge, released with the statistics bureau, includes construction. “We are a little bit cautious on China because it is going through a slowdown story as well,” said Ling. “People are trying to gauge how much of a slowdown we may see.” In Europe, leaders raised the prospect for the first time of the euro area splintering, choosing to treat Greece’s December referendum on the bailout package as an in-or-out vote on the debt-stricken nation’s future in the currency union. ‘Escalation in Europe’ “An escalation in Europe would cause the oil price to fall,” Colin Whitehead, an analyst at Fat Prophets, said today in an interview in Sydney. “Sentiment is a huge driver of the price at present.” Brent oil’s technical support levels are being eroded, suggesting a more bearish outlook for the European crude, Helen Henton, London-based head energy analyst at Standard Chartered Plc, said in a report e-mailed today. Key support can be found at $99.80 a barrel, followed next by $89.58, she said. “Near-term we are bearish, given precarious growth sentiment, projected euro weakness through the fourth quarter of 2011 and slowly improving supply prospects,” Henton said. While New York’s West Texas Intermediate has given up almost all its gains this year, it has settled above $90 a barrel for almost two weeks. A price above $90 is “probably fair” given growing demand driven by China and India, said Whitehead. To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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