Crude Oil Extends Decline as OPEC Output Rises, Equities Drop

May 14 (Bloomberg) -- Oil fell for a second day after OPEC boosted output for the first time since July and U.S. equities dropped on a report showing that retail sales unexpectedly weakened in April.

The Organization of Petroleum Exporting Countries increased oil production last month, exceeding the group’s quota by 967,000 barrels a day. Stocks fell in the U.S., the world’s largest oil-consuming nation, after the Commerce Department said that purchases at stores decreased 0.4 percent.

“Oil is facing pressure from a surprise increase in OPEC supply and a down swing in the major indexes,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “The energy market may not be ready for $60 oil.”

Crude oil for June delivery dropped 35 cents, or 0.6 percent, to $57.67 a barrel on the New York Mercantile Exchange at 9:18 a.m. in Sydney. Yesterday, the contract fell 83 cents, or 1.4 percent, to settle at $58.02 a barrel. It was the biggest decline since April 27. Prices initially rose after an Energy Department report showed that U.S. supplies dropped for the first time in 10 weeks.

Oil touched $60.08 on May 12, a six-month high.

The Standard & Poor’s 500 Index declined 2.7 percent to 883.92 and the Dow Jones Industrial Average dropped 2.2 percent to 8,284.89.

Economists forecast that the Commerce Department report would show that retail sales were unchanged, according to the median of 67 projections in a Bloomberg News survey.

OPEC Production

The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day, down from a revised 82 percent for March, the Vienna-based organization said in a monthly report yesterday.

Those 11 nations, which exclude Iraq, pumped 25.812 million barrels a day in April, the report said, citing secondary sources, which include estimates from analysts and news organizations. That compares with 25.587 million a day in March. Those 11 nations have a target of 24.845 million barrels a day that took effect from Jan. 1.

The 12-member group will take into consideration the recent increase in oil prices when it meets on May 28 to decide whether a cut in output is needed to support prices, said Shokri Ghanem, the chairman of Libya’s National Oil Corp.

Oil prices are up 30 percent this year, supported by record production cuts announced by OPEC at three meetings in 2009.

U.S. Fuel Demand

Total U.S. daily fuel demand averaged 18.2 million barrels in the four weeks ended May 8, down 7.9 percent from a year earlier, the Energy Department report showed.

Deliveries of petroleum products, a measure of consumption, averaged 19.1 million barrels a day from the beginning of the year through April, 4 percent less than during the same period in 2008, according to a report yesterday from the industry- funded American Petroleum Institute. Fuel use was the lowest for the first four months of the year in 11 years.

OPEC cut its 2009 demand forecast for the ninth straight month, according to a monthly report from the Vienna-based group.

Consumption will contract by 1.57 million barrels a day this year, or 1.8 percent, to 84.03 million barrels, OPEC said yesterday. That’s 150,000 barrels lower than the April forecast.

U.S. crude-oil supplies dropped 4.63 million barrels to 370.6 million in the week ended May 8, the Energy Department said. Stockpiles were forecast to increase by 1 million barrels, according to the median of responses in a Bloomberg News survey.

Gasoline inventories fell 4.15 million barrels to 208.3 million in the week ended May 8, the Energy Department report showed. The 16 analysts surveyed by Bloomberg news before the report were split over whether stockpiles of the motor fuel would rise or fall.

Gasoline futures for June delivery rose 2.09 cents, or 1.3 percent, to settle at $1.6888 a gallon in New York.

Brent crude oil for June settlement fell 60 cents, or 1 percent, to end the session at $57.34 a barrel on London’s ICE Futures Europe exchange.