Oil Drops a Fourth Day on Forecast U.S. Supplies Rose Last Week

April 8 (Bloomberg) -- Crude oil fell for a fourth day on speculation that a government report today will show U.S. supplies increased as the recession curbed fuel demand.

Stockpiles rose 1.5 million barrels last week, according to the median of 12 estimates by analysts in a Bloomberg News survey before the Energy Department report. Futures also dropped as falling U.S. equities signaled that fuel demand in the world’s biggest energy-consuming country will decline.

“The equity markets are down, which leaves us to concentrate on the fundamentals of this market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We still haven’t seen any evidence that the excess supply is being absorbed.”

Crude oil for May delivery fell 83 cents, or 1.7 percent, to $48.32 a barrel at 8:18 a.m. Sydney time on the New York Mercantile Exchange. Oil has risen 8.3 percent this year and is down 67 percent from a record in July. Yesterday, crude dropped $1.90, or 3.7 percent, to $49.15 a barrel, the lowest settlement since April 1.

The drop in prices accelerated in electronic trading after the industry-funded American Petroleum Institute reported that oil supplies increased last week to the highest since 1990. Stockpiles rose 6.94 million barrels to 364.7 million, API said. 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 Energy Department requires reports to be filed for its weekly survey. The department is scheduled to release its weekly report at 10:30 a.m. today in Washington.

Oil Stockpiles

Crude-oil inventories climbed 2.84 million barrels to 359.4 million in the week ended March 27, the highest since July 1993, the Energy Department reported on April 1. It was the 23rd gain in 27 weeks. The increase left supplies 13 percent higher than the five-year average.

The price of oil for delivery in May is lower than for the following months, allowing buyers to profit from storing crude, a structure known as contango. The price of oil on the Nymex for delivery in June is $2.76 a barrel higher than for May, up from a $2.33 premium April 6.

Gasoline stockpiles probably dropped 1.4 million barrels from 216.8 million the prior week, according to the survey of analysts. Distillate fuels, a category that includes heating oil and diesel, probably fell 600,000 barrels from 144.2 million.

Fuel Prices

Gasoline futures for May delivery dropped 1.51 cents, or 1 percent, to settle at $1.4604 a gallon in New York. Heating oil for May delivery fell 2.88 cents, or 2 percent, to end the session at $1.3903 a gallon.

Refineries probably operated at 81.7 percent of capacity, unchanged from the week before, according to the median of responses in the survey.

The International Energy Agency, the Organization of Petroleum Exporting Countries and the Energy Department cut their 2009 forecast for oil demand in March.

The IEA will probably lower its global demand outlook this month, given slowing world economic growth, Executive Director Nobuo Tanaka said April 2. The Paris-based agency is scheduled to release its next report on April 10.

“By all accounts, they’re going to lower projections for demand,” said Dominick Chirichella, a senior partner at the Energy Management Institute in New York. “At the end of the day, the fundamentals are bearish.”

The Standard & Poor’s 500 Index fell 2.3 percent to 816.03 yesterday. The Dow Jones Industrial Average tumbled 193.06 points, or 2.4 percent, to 7,782.79.

Brent crude oil for May settlement dropped $1.02, or 2 percent, to end the session at $51.22 a barrel on London’s ICE Futures Europe exchange.

May Brent futures are $2.07 a barrel higher than Nymex oil for the same month, the biggest premium for the front-month contract since Feb. 24. Brent oil is often priced at a discount to Nymex crude and traded lower for most of March.