Oil Falls a Third Day After U.S. Retail Sales Unexpectedly Drop

April 15 (Bloomberg) -- Crude oil fell for a third day after a report showed that retail sales in the U.S., the biggest energy-consuming country, unexpectedly declined in March.

The oil market retreated after the Commerce Department reported that sales dropped 1.1 percent, and the Labor Department said prices paid to U.S. producers decreased in March after two months of gains. Futures also fell as the U.S. Energy Department and International Energy Agency cut demand forecasts.

“The oil market is going to be driven by the economy,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “Both the retail sales numbers and the PPI point to continued weakness.”

Crude oil for May delivery fell 26 cents, or 0.5 percent, to $49.15 a barrel at 8:31 a.m. Sydney time on the New York Mercantile Exchange. Oil is up 10 percent this year after tumbling 54 percent in 2008. Yesterday, crude dropped 64 cents, or 1.3 percent, to settle at $49.41 a barrel.

U.S. equities dropped for the first time in four days yesterday as the declines in retail sales and producer prices offset optimism from Federal Reserve Chairman Ben S. Bernanke that the pace of the economy’s slump may be slowing.

The Standard & Poor’s 500 Index slipped 1.3 percent to 847.16. The Dow Jones Industrial Average dropped 94.7 points, or 1.2 percent, to 7,963.11.

U.S. Inventories

An Energy Department report today may also show a decline in demand. Oil supplies rose 1.75 million barrels last week, according to the median of 14 responses in a Bloomberg News survey. Stockpiles in the week ended April 3 were the highest since July 1993 as refiners shut units for maintenance and producers outside the OPEC countries increased shipments.

The industry-funded American Petroleum Institute reported yesterday that oil supplies increased last week to the highest since 1990. Stockpiles rose 6.51 million barrels to 371.2 million, API said. The report was released at 4:30 p.m. yesterday 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.

Gasoline stockpiles probably dropped 500,000 barrels from 217.4 million the prior week, according to the survey.

Gasoline futures for May delivery fell 0.56 cent, or 0.4 percent, to settle at $1.4576 a gallon in New York.

‘Fundamental Change’

Global oil demand will average 84.09 million barrels a day this year, according to the Energy Department’s Short-Term Energy and Summer Fuels Outlook, released yesterday. That’s 180,000 barrels lower than a forecast in March. The estimate is down 1.36 million barrels a day, or 1.6 percent, from demand in 2008.

“There may be a fundamental change in consumption,” said Joseph Tatusko, who manages $720 million at Westport Resources in Westport, Connecticut. “Even when the economy recovers, demand could lag. People’s habits are likely to change.”

World consumption will decline 2.4 million barrels a day to 83.4 million this year, according to an International Energy Agency report on April 10.

Members of the Organization of Petroleum Exporting Countries may take in $476 billion from oil exports this year, down 51 percent from 2008, according to the report yesterday from the Energy Information Administration, the department’s statistical arm. The estimate was increased by 24 percent from last month’s forecast of $383 billion.

OPEC Cuts

OPEC agreed at three meetings last year to cut output by 4.2 million barrels a day, or 14 percent, to 24.845 million. The group produced an average 27.395 million barrels a day last month, down 345,000 barrels from February, according to a Bloomberg News survey of oil companies, producers and analysts.

“Prices will probably stay in the $50 area unless the economy gets a lot worse,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “OPEC has succeeded in putting a floor under prices with their production cuts.”

West Texas Intermediate crude oil, the U.S. benchmark, will average $52.64 a barrel in 2009, down from $99.57 in 2008, according to the Energy Department report.

“I think we’re just going to meander between $45 and $55,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “Until we get a clear sign the economy is rebounding, we’re just range bound. The days of the $20- to $30-dollar move in crude are over.”

Brent crude oil for May settlement declined 18 cents, or 0.3 percent, to end the session at $51.96 a barrel on London’s ICE Futures Europe exchange.