Crude Oil Falls on Dollar Rebound, U.S. Gasoline Supply Build

June 17 (Bloomberg) -- Crude oil fell for a third day as the dollar gained, reducing the appeal of commodities as an alternative investment, and an industry report showed U.S. gasoline supplies rose.

Motor fuel supplies last week climbed 2.1 million barrels even as the U.S. has entered the peak summer driving demand season, the industry-funded American Petroleum Institute said late yesterday. Industrial production dropped 1.1 percent in May signaling that the manufacturing slump remains broad-based, with capacity utilization falling to a record low of 68.3 percent.

“Oil as a commodity is particularly dependent on the U.S. economy so it will always have a sensitivity to the industrial data,” said Mark Pervan, a senior commodity strategist with Australia and New Zealand Banking Group Ltd. in Melbourne. “You would think at this time of the year we’d see lower U.S. gasoline stocks. That may be flagging that oil isn’t so strong in the gasoline market.”

Crude oil for July delivery fell as much as 56 cents, or 0.8 percent, to $69.91 a barrel in electronic trading on the New York Mercantile Exchange. It was at $70.03 a barrel at 8:22 a.m. Singapore time. Last week, oil touched a seven-month high of $73.23 a barrel. It has risen 57 percent this year. Yesterday, oil fell 15 cents to $70.47 a barrel.

Oil yesterday retreated from a 3 percent advance as the dollar strengthened from its weakest level against the euro since May 21.

The U.S. currency strengthened to $1.3837 against the euro yesterday after touching $1.3933, the weakest level since May 21. It was trading at $1.3833 at 8:14 a.m. Singapore time.

Equities Decline

U.S. stocks extended declines, undermining the optimism that the economy has past the worst of the global recession. The Standard & Poor’s 500 Index fell 1.3 percent to 911.97 in New York. The Dow Jones Industrial Average dropped 107.46, or 1.3 percent, to 8,504.67.

“Pressure was put on the oil market from the major equities indexes trading lower for much of the day,” said Mike Sander, an investment adviser at Sander Capital in Seattle. “The past two days we have seen oil trade below $70 and not hold. We will need oil to close below that barrier if we want it to trade lower.”

Brent crude for August settlement was at $70 a barrel, down 24 cents, on London’s ICE Futures Europe exchange at 8:17 a.m. Singapore time. The contract ended yesterday unchanged from June 15 at $70.24 a barrel.