Crude Oil Falls on Dollar Advance, Speculation of Supply Gains

July 6 (Bloomberg) -- Crude oil fell on a stronger dollar and speculation U.S. fuel inventories will increase as the recession curbs demand in the world’s biggest energy-consuming country.

The dollar climbed against the euro, limiting investors’ appetite for assets to hedge against inflation such as commodities. Eighteen of 37 analysts surveyed by Bloomberg News, or 49 percent, said futures will decline through July 10.

“The U.S. dollar is a bit firmer this morning and that is probably hurting the oil price,” said David Moore, a commodity strategist at Commonwealth Bank of Australia. “There may be a bit of a follow through after the poor employment report from the U.S., which has left people more cautious about the outlook for the economy.”

Crude oil for August delivery fell $1.57, or 2.4 percent, to $65.16 a barrel on the New York Mercantile Exchange at 10:06 a.m. in Sydney.

Oil dropped 3.7 percent July 2 to $66.73. Electronic trades from July 3 will be counted as part of today’s session because of the U.S. Independence Day holiday.

A rising dollar reduces the attraction of raw materials such as oil and gold to investors. The dollar traded at $1.3956 per euro from $1.3980 as of 8:32 a.m. in Tokyo. The dollar has risen since July 2 after worse-than-expected non-farm payroll data from the U.S.

“Oil is softer despite news of further disruptions to supply in Nigeria,” Moore said.

Shell Attack

The Movement for the Emancipation of the Niger Delta, the main militant group in Nigeria, said yesterday it attacked an oil facility run by Royal Dutch Shell Plc in the country’s southern region.

Armed attacks in the Niger River delta, which accounts for nearly all of Nigeria’s oil, have cut more than 20 percent of Nigeria’s oil exports since 2006. Nigeria is Africa’s leading oil producer and the fifth-biggest source of U.S. oil imports.

U.S. gasoline stockpiles climbed 2.33 million barrels to 211.2 million last week, an Energy Department report on July 1 showed.

Inventories of distillate fuel, a category that includes diesel and heating oil, climbed 2.9 million barrels to 155 million, the highest since 1987.

Total daily fuel demand averaged over the four weeks ended June 26 was down 5.8 percent from a year earlier, the Energy Department said. Distillate-fuel demand over the period fell 9.4 percent to 3.4 million barrels a day.

Gasoline for August delivery declined 3.4 cents, or 1.9 percent, to $1.7570 a gallon at 8:58 a.m. Sydney time in New York.

Brent crude oil for August settlement fell 56 cents, or 0.9 percent, to $65.05 a barrel at 8:52 a.m. on London’s ICE Futures Europe exchange.