Crude Oil Declines a Third Day as Swine Flu May Curb Fuel Use

April 29 (Bloomberg) -- Crude oil fell for a third day on concern that fuel demand will drop as the swine-flu outbreak curtails travel and delays a recovery from the global recession.

Oil, gold and copper declined yesterday as the World Health Organization raised its global pandemic alert to the highest since the warning system was adopted in 2005, saying the disease is not containable. Crude rose in eight of the past 10 weeks as the stock market climbed on speculation that the economy and energy consumption would rebound later this year.

“There’s a potential that a swine-flu outbreak will crimp economic growth,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “There’s also recognition that the recent rally was overly optimistic. Demand isn’t recovering and more negative economic surprises are probably in store.”

Crude oil for June delivery fell 55 cents, or 1.1 percent, to $49.37 a barrel at 8:50 a.m. Sydney time on the New York Mercantile Exchange.

In New York trading, June futures fell 22 cents to settle at $49.92 a barrel. Prices are up 12 percent this year.

Airline stocks tumbled worldwide yesterday. U.S. carriers reported some cases of suspected flu-like symptoms to health authorities, the Air Transport Association trade group said. The U.S. Centers for Disease Control and Prevention recommended that nonessential travel to Mexico be avoided.

SARS Comparisons

Air travel in Asia fell after the outbreak of Severe Acute Respiratory Syndrome in 2003.

“A number of comparisons have been made to SARS, but there are major differences between now and then,” said Nauman Barakat, senior vice president of energy at Macquarie Futures USA Inc. in New York. “I don’t think this will have the same impact as SARS because we are already in the midst of a major downturn and discretionary fuel demand is already down.”

Brent crude for June settlement fell 33 cents, or 0.7 percent, to end the session at $49.99 a barrel on London’s ICE Futures Europe exchange.

Nigeria, vying with Angola to be Africa’s biggest oil producer, reduced the official selling prices for its benchmark crude exports in May to the lowest in more than three years.

Bonny Light and Qua Iboe prices were cut $1.20 to a premium of 60 cents a barrel over Dated Brent, according to traders with knowledge of the price list compiled by state-owned Nigerian National Petroleum Corp. That is the lowest since January 2006.

Nigeria produces low-sulfur, or sweet, crude oil, prized by U.S. refiners because of the proportion of high-value gasoline and distillate fuel it yields.

Commodities Weaker

Other commodities dropped on concern that the spread of swine flu will exacerbate the economic slowdown. Yesterday, the Reuters/Jefferies CRB Index of 19 commodities declined 0.97 point, or 0.4 percent, to 217.22.

Copper futures for July delivery dropped 6.9 cents, or 3.5 percent, to $1.9165 a pound on the Comex division of Nymex, the lowest settlement for a most-active contract since April 2.

“There’s still a lot of inventory on hand,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “Any risk of even lower demand will probably result in the dumping of a lot more oil on the market.”

An Energy Department report later today will probably show that U.S. crude oil stockpiles rose by 1.8 million barrels last week, according to the median of 14 analyst responses in a Bloomberg News survey. Supplies climbed to 370.6 million barrels in the week ended April 17, the highest since September 1990.

Gasoline Supplies

Gasoline stockpiles increased 200,000 barrels from 217.3 million the prior week, according to the survey. Inventories of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels from 142.3 million.

After floor trading ended yesterday, the industry-funded American Petroleum Institute reported crude oil inventories rose 4.58 million barrels to 374.8 million last week. The report was released at 4:30 p.m. in Washington.

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.