Oil Falls Amid High U.S. Stockpiles, Forecasts of Weaker Demand

April 17 (Bloomberg) -- Crude oil fell and was poised for its biggest weekly decline since February, amid forecasts the recession will curb demand at a time when U.S. inventories are already at their highest in almost 19 years.

U.S. crude-oil inventories rose 5.67 million barrels to 366.7 million last week, the highest since September 1990, an Energy Department report showed April 15. The International Energy Agency reported on April 10 that worldwide consumption will shrink by 2.8 percent in 2009 as the global economy contracts by 1.4 percent.

“I think there’s potential for oil prices to slide off the current plateau and fall back to perhaps a number like $40 a barrel, just because inventories are at such an elevated level and may not have peaked yet,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York.

Crude oil for May delivery fell as much as 48 cents, or 1 percent, to $49.50 a barrel and was at $49.74 at 9:19 a.m. Sydney time on the New York Mercantile Exchange. Oil has dropped 5 percent this week, poised for its sharpest decline since the week ended Feb. 13.

Oil in New York has tumbled 66 percent from a record $147.27 in July as the recession in major consuming countries curbed fuel demand.

U.S. fuel demand in the first quarter fell to the lowest for the period in 11 years, the American Petroleum Institute said in a monthly report yesterday. Deliveries of petroleum products, a measure of consumption, averaged 19.2 million barrels a day, 3.4 percent less than during the same period in 2008, the industry-funded API said.

Jobless Claims

Prices are up 12 percent so far this year and rose 73 cents, or 1.5 percent, yesterday to settle at $49.98 a barrel.

Oil climbed as much as 2.5 percent after the Labor Department reported that claims decreased by 53,000 to 610,000 in the week ended April 11, the fewest since January. Chinese industrial production expanded by 8.3 percent in March from a year earlier, up from 3.8 percent in the first two months, the statistics bureau said yesterday in Beijing.

“It’s sort of a contest between hope and reality,” Citi Futures’ Evans said. “A lot of these numbers that have bounced have bounced from extremely low levels, and so it only makes the markets a little less bearish. It doesn’t necessarily make them bullish.”

The Federal Reserve said in its Beige Book business survey April 15 that economic contractions were slowing or stabilizing in San Francisco, the largest district, as well as in New York, Chicago, Kansas City and Dallas.

‘Badly Calibrated’

The IEA’s forecast is excessive and “badly calibrated,” according to analysts at Barclays Capital. The bank, the Organization of Petroleum Exporting Countries and the U.S. Energy Information Administration predict demand will decline about half as much.

OPEC will load about 22.2 million barrels a day in the four weeks ending May 2, down from 22.8 million a day in the month ended April 4, Oil Movements, the Halifax, England-based tanker- tracker, said yesterday in a report.

OPEC agreed at three meetings last year that the 11 members with quotas would cut output by 4.2 million barrels a day to 24.845 million. The members with production targets, all except Iraq, pumped 25.567 million barrels a day in March, according to a monthly report the organization released April 15.

“Trying to guess the oil price is difficult,” Iain Conn, BP’s head of refining and marketing, said in an interview in London yesterday. “It’s about a race between demand and OPEC discipline. I believe it is perfectly reasonable to assume that we will see the moderate oil prices we see today for some time.”

West Texas Intermediate crude oil, the U.S. benchmark, will average $45 a barrel in 2009, according to a report from Moody’s Investors Service. That’s down from the rating company’s previous estimate that prices would average $50 this year. WTI is forecast to average $50 in 2010, down from a previous forecast of $55.

Brent crude oil for June settlement rose 62 cents, or 1.2 percent, to $53.06 a barrel on London’s ICE Futures Europe exchange.