Oil Falls for a Second Day After Confidence in Recovery Falters

June 15 (Bloomberg) -- Oil fell for a second day on speculation its dollar-driven rally to a seven-month high last week outpaced prospects for a recovery in fuel demand.

A report today in the U.S., the world’s largest oil consumer, may show manufacturing in New York state contracted for a 14th month. OPEC members are waiting for signs of economic recovery and are unlikely to increase production when the group next meets in September, Qatar Oil Minister Abdullah bin-Hamad Al-Attiyah said yesterday.

“Some of these commodities really have put on some pretty solid gains without really much fundamental basis,” said Toby Hassall, research analyst at Commodity Warrants Pty in Sydney. Oil “is vulnerable to some corrective action, especially if we see further strength in the dollar.”

Crude oil for July delivery fell as much as 48 cents, or 0.7 percent, to $71.56 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $71.57 a barrel at 9:10 a.m. in Singapore.

The contract fell 0.9 percent to $72.04 a barrel on June 12, its first decline in four days, after a worse-than-expected plunge in European industrial production dented confidence in the global recovery and boosted the dollar, reducing the investment appeal of commodities. Oil reached $73.23 on June 11, the highest since Oct. 21.

“There are increased signs of stabilization in our economies,” finance ministers from the Group of Eight nations said June 13. Still, “the situation remains uncertain,” the group said.

Oil Rally, Dollar

New York oil futures have gained 46 percent in the past two months, as the dollar fell 5.6 percent against a basket of six major currencies.

The dollar rose for a second day today, trading at $1.3984 to the euro in early Asian trading, from $1.4016 late in New York last week.

“The first couple of sessions this week will really tell us if this rally remains intact” for oil, Hassall said. Even if prices press higher as the global economy strengthens, “it’s difficult to see us hitting $100 by the end of the year,” he said.

Brent crude for July delivery fell as much as 42 cents, or 0.6 percent, to $70.50 a barrel on London’s ICE Futures Europe exchange. The contract, which expires today, fell 87 cents, or 1.2 percent, to settle at $70.92 a barrel on June 12.

The more actively traded August contract declined as much as 41 cents, or 0.6 percent, to $71.39 a barrel.

Militants, Net-Longs

Militant rebels in Nigeria, Africa’s biggest oil producer and the sixth-largest in OPEC, blew up two oil wells and pipelines at the Chevron Corp.-operated Makaraba field, the Movement for the Emancipation of the Niger Delta said yesterday.

OPEC pumps about 40 percent of the world’s oil. The group last week lowered its 2009 demand forecast to 83.8 million barrels a day, from 84.03 million a month earlier. Daily consumption may climb to 84.6 million barrels in the fourth quarter from 83 million now and 84.9 million in the fourth quarter of 2008, it said June 12.

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended June 9, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 47,883 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose 8,196 contracts, or 21 percent, from a week earlier.