Oil Pares Gains, Trades Below $64, on Fuel Stockpile Increase

July 21 (Bloomberg) -- Crude oil pared gains, trading below $64 a barrel, on speculation fuel stockpiles will increase in the U.S., the world’s largest energy user.

U.S. gasoline inventories probably rose last week, according to a Bloomberg News survey. That would be the sixth week of increases during what is typically the peak demand season for the fuel. Stock markets in China, the second-largest oil user, declined from a 13-month high on concern that this year’s rally may be overdone.

“We may be recovering and we may have sequential changes that are positive but year-on-year levels of activity are showing wide output gaps,” Harry Tchilinguirian, a senior oil markets analyst at BNP Paribas, said in a Bloomberg Television interview. “You have to stop and think if the rally we’ve been having, of course equity-driven, is going to be sustainable.”

Crude oil for August delivery was at $63.63 a barrel, down 35 cents, on the New York Mercantile Exchange at 3:08 p.m. Singapore time. It earlier rose as much as 56 cents, or 0.9 percent, to $64.54 a barrel. Oil has fallen 13 percent from an eight-month high of $73.38 reached on June 30.

The August contract expires today. The more-active September contract fell as much as 76 cents, or 1.2 percent, to $64.53 a barrel.

Oil advanced yesterday along with the U.S. stock market after a gauge of economic indicators rose in June.

The Shanghai Composite Index fell 32.92, or 1 percent, to 3,234.00 at 2:08 p.m. The gauge has surged 78 percent this year.

Oil Inventories

U.S. crude oil stockpiles probably fell for a 10th week out of 11, a Bloomberg News survey showed. Inventories declined 2.25 million barrels in the week ended July 17, according to the median of 12 estimates by analysts before an Energy Department report tomorrow.

Gasoline inventories probably increased 850,000 barrels from 214.6 million. Supplies of distillate fuel, a category that includes heating oil and diesel, probably rose 1.5 million barrels from 159.3 million. The Energy Department is scheduled to release its report tomorrow at 10:30 a.m. in Washington.

Gasoline for August delivery fell as much as 1.14 cents, or 0.6 percent, to $1.7780 a gallon on the New York exchange.

Refiners in China, the world’s largest energy consumer after the U.S., increased operating rates for an eighth week to 85.1 percent of capacity on July 16, said CBI China, a Shanghai- based commodities researcher.

Brent crude for September settlement declined as much as 75 cents, or 1.1 percent, to $65.69 a barrel on London’s ICE Futures Europe Exchange. The contract was at $65.88 at 3:12 p.m. Singapore time.