Oil Snaps Three Days of Gains on Equity Drop, Refinery Restart

May 21 (Bloomberg) -- Crude oil fell in New York, snapping three days of gains, after the Federal Reserve predicted a deeper recession in the U.S. and a refinery resumed operations after a fire.

Oil declined after minutes of the Federal Open Market Committee meeting on April 28-29 showed that some members want the central bank to boost its purchases of assets to revive growth. Flint Hills Resources LLC planned to restart a gasoline- making unit at the Corpus Christi, Texas, refinery yesterday after shutting down the unit a day earlier because of a fire.

“We really haven’t seen any improvement in demand,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “I just don’t think the fundamentals of the oil market can support prices up around the early $60s.”

Crude oil for July delivery dropped as much as 69 cents, or 1.1 percent, to $61.35, and was at $61.55 on the New York Mercantile Exchange at 1:50 p.m. in Singapore. Yesterday, oil rose $1.94, or 3.2 percent, to settle at $62.04 a barrel, the highest settlement since Nov. 10.

The Standard & Poor’s 500 Index slipped 0.5 percent to 903.47 and The Dow Jones Industrial Average lost 0.6 percent to 8,422.04.

Refinery Rates

Crude oil may be poised to fall further, based on technical indicators used by traders. The 30-day relative strength index has climbed to 60.58 today. The last time it was near this level, at 60.90 on July 14, the oil price started a 22 percent drop from $145.18 a barrel to $112.87 on Aug. 18.

U.S. refineries operated at 81.8 percent of capacity, down 1.9 percentage points from the prior week, the Energy Department report showed.

“It was a pretty significant drop,” Hassall said. “We are operating at the moment almost 10 percent below the five- year average rate, which is really an indication of the demand environment.”

Emissions associated with the Flint Hills refinery startup were planned between 3 p.m. and 9 p.m. local time yesterday, the company said in a “pre-notification” startup notice filed with the Texas Commission on Environmental Quality. A catalytic cracker makes products such as gasoline and diesel.

Sunoco Inc. shut a gasoline-making unit at its Marcus Hook, Pennsylvania, refinery after a fire on May 17.

Fighting between Nigerian troops and the militant group Movement for the Emancipation of the Niger Delta erupted on May 13. Nigeria produces low-sulfur oil, prized by U.S. refiners because of the proportion of high-value gasoline it yields.

Fizzling Rally

“So far the trend is up,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “I would still be cautious for what is to come after Memorial Day and the OPEC meeting. The rally could fizzle and the markets could calm for the summer and stay flat to down.”

The Organization of Petroleum Exporting Countries is unlikely to reduce output further when it meets on May 28, a member of Kuwait’s Supreme Petroleum Council was cited as saying by state-owned KUNA news agency yesterday. OPEC is still implementing a series of supply cuts announced last year.

The 11 OPEC members with quotas, all except Iraq, pumped 25.812 million barrels a day last month, a report from the group on May 13 said, citing secondary sources, which include estimates from analysts and news organizations. That’s up 225,000 barrels a day from March.

Gasoline for June delivery declined as much as 3.75 cents, or 2.1 percent, to $1.7720 a gallon in New York.

Inventories Decline

Total U.S. daily fuel demand in the four weeks ended May 15 fell 7.6 percent from a year earlier, an Energy Department report showed yesterday.

Crude stockpiles dropped 2.11 million barrels to 368.5 million in the week ended May 15, the Energy Department said. A 400,000-barrel decrease was forecast, according to a Bloomberg News survey.

Gasoline supplies plunged 4.34 million barrels to 204 million. A 1.2 million-barrel drop was forecast, according to the median estimate of 15 analysts surveyed by Bloomberg News.

Energy and metals futures also gained after the dollar fell to the lowest level versus the euro in four months, bolstering demand for commodities as an alternative investment. The dollar traded at $1.3788 from $1.3780 yesterday, after dropping 1.1 percent and touching $1.3830, the weakest level since Jan. 5.

Gold rose to the highest in almost two months. Immediate- delivery gold gained for a third day, rising 0.4 percent to $942.24 an ounce at 11:29 a.m. in Singapore. Earlier, the metal touched $943.10, the highest since March 26, taking gains from year’s low of $802.59 to about 17.5 percent.

Brent crude for July settlement fell as much as 66 cents, or 1.1 percent, to $59.93 a barrel on London’s ICE Futures Europe exchange.