Oil Falls From Seven-Month High on Signs OPEC Output Climbing

June 2 (Bloomberg) -- Crude oil retreated from a seven- month high in New York on signs OPEC’s output is climbing and as traders who bet on rising prices sell futures to lock in gains.

Oil jumped as much as 3.6 percent yesterday, capping a 12 percent increase since May 21, after the U.S. and China reported increases in manufacturing activity. The Organization of Petroleum Exporting Countries raised their production by 1.5 percent in May, according to a Bloomberg News survey.

“OPEC countries are starting to see prices at $70 and then they start exerting less discipline on the quotas,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “The price ran pretty high overnight so we may be seeing some profit-taking as people still consider the fundamentals quite weak.”

Crude oil for July delivery fell as much as 99 cents, or 1.4 percent, to $67.59 a barrel on the New York Mercantile Exchange. It was at $67.89 a barrel at 3:02 p.m. Singapore time. Yesterday, oil closed at $68.58 a barrel, the highest settlement since Nov. 4. Prices are up 53 percent this year.

Futures climbed yesterday on expectation that fuel demand will increase as the economy improves later this year. The Institute for Supply Management’s U.S. factory index rose to 42.8 from 40.1 in April and China’s Purchasing Manager’s Index showed manufacturing in May gained for a third month.

“This morning’s move lower is a chance to go long again,” said Jonathan Kornafel, a director for Asia at options trader Hudson Capital Energy in Singapore. “We’re finally seeing some positive economic data coming out of the U.S. and in Asia.”

Driving Season

Fuel demand during the U.S. summer driving season may prove stronger than projected as consumers recover from the shock of the global financial crisis, Richard Jones, deputy executive director of the International Energy Agency, said yesterday.

Economists expected the ISM’s U.S. manufacturing index to climb to 42.3, according to the median of responses in a Bloomberg News survey. Readings of less than 50 on the Tempe, Arizona-based group’s gauge signal a contraction.

The U.S. and China are the biggest oil-consuming countries, responsible for 33 percent of global demand in 2007, according to BP Plc, which publishes its BP Annual Statistical Review of World Energy each June.

OPEC’s oil production averaged 28.15 million barrels a day last month, up 405,000 barrels a day from April, according to the survey of oil companies, producers and analysts. The 11 OPEC members with quotas, all except Iraq, pumped 25.76 million barrels a day, 915,000 more than their target.

U.S. Stockpiles

U.S. crude-oil stockpiles probably dropped 1.75 million barrels in the week ended May 29 from 363.1 million the previous week, according to the median of eight estimates by analysts before an Energy Department report this week. Inventories likely fell as refiners increased their operations to meet demand during the summer driving season.

Refineries probably operated at 85.5 percent of capacity last week, up 0.4 percentage point from the previous week, according to the median of responses in the survey. News survey showed. Plant rates climbed 3.3 percentage points in the week ended May 22, the biggest gain since October, according to the Energy Department. Operating rates increased during the last week in May in every year but one since 2000.

Brent crude for July settlement fell as much as 92 cents, or 1.4 percent, to $67.05 a barrel and was at $67.37 on London’s ICE Futures Europe exchange at 3:03 p.m. Singapore time.