Oil Rises After Industry Report Shows Drop in Crude Inventories

July 1 (Bloomberg) -- Oil rose above $70 after an industry report showed the biggest decline in crude inventories since September in the U.S., the world’s largest user of the fuel.

Crude supplies fell by 6.8 million barrels to 349.7 million last week, the industry-funded American Petroleum Institute said yesterday. A U.S. Energy Department report today will probably show crude-oil stockpiles declined 2 million barrels, according to the median of 15 estimates in a Bloomberg News survey.

“A fall in crude inventories will cause the market to move higher,” said Mike Sander, an investment adviser with Sander Capital in Seattle. Should the government report also show a decline “it will reinforce crude to stay at or go above current levels,” he said.

Oil for August delivery gained as much as 86 cents, or 1.2 percent, to $70.75 a barrel on the New York Mercantile Exchange, and was at $70.63 at 9:57 a.m. Sydney time. Oil dropped 2.2 percent from an eight-month high yesterday to $69.89, after a decline in June U.S. consumer confidence.

Oil in New York posted a 41 percent quarterly gain, the biggest since 1990. Prices have rallied as rebounding world equity markets and a weaker dollar encouraged investors to buy the commodity as an alternative investment.

The U.S. currency traded at $1.4035 versus the euro at 6:03 a.m. in Tokyo, following a 0.4 percent gain yesterday.

Fuel Supply Rise

The Energy Department report, due at 10:30 a.m. in Washington, will probably show that U.S. fuel inventories rose last week and gasoline supplies climbed 2 million barrels, according to the survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, increased 1.5 million barrels.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the energy Department for its weekly survey.

Total U.S. daily fuel demand in the four weeks ended June 19 was down 6.6 percent from a year earlier, the Energy Department said last week.

Gasoline for August delivery gained 2 cents, or 1 percent, to $1.9220 a gallon at 8:28 a.m. Sydney time in New York. Yesterday, it declined 3.34 cents, or 1.7 percent, to end the session at $1.9020 a gallon in New York. U.S. gasoline inventories rose 209,000 barrels last week, the API said yesterday.

Brent crude oil for August settlement fell $1.69, or 2.4 percent yesterday, to end the session at $69.30 a barrel on London’s ICE Futures Europe exchange.