Oil Drops From Seven-Week High as Equities Fall, Supplies Rise

Aug. 6 (Bloomberg) -- Oil fell from a seven-week high after equities declined and a government report showed an increase in crude stockpiles in the U.S., the largest energy-using nation.

The Standard & Poor’s 500 Index fell from a nine-month high after reports on U.S. job losses and service industries were worse than economists forecast. Oil also dropped after an Energy Department report released yesterday showed a bigger-than- estimated rise in crude stockpiles.

“Crude oil and the metals have benefited a lot on expectations of an international economic recovery -- to my mind perhaps disproportionately so,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “I think there might be some pullback in the oil price over the next two or three months.”

Crude oil for September delivery fell 37 cents, or 0.5 percent, to $71.60 a barrel on the New York Mercantile Exchange at 10 a.m. Sydney time. Yesterday, the contract rose 55 cents, or 0.8 percent, to settle at $71.97, the highest since June 12.

Oil advanced yesterday after the Energy Department report showed that fuel supplies dropped as consumption increased. Fuel demand climbed 3.1 percent to 19.3 million barrels a day last week, the highest since February.

The S&P 500 declined for the first time in five days, slipping 0.3 percent to 1,002.72 in New York. The Dow Jones Industrial Average fell 0.4 percent to 9,280.97.

Inventories ‘Still High’

Crude-oil stockpiles climbed 1.67 million barrels to 349.5 million last week, according to the Energy Department report. A 600,000-barrel gain was forecast, according to analysts in the Bloomberg News survey conducted before the report’s release.

“I think the overall level of inventories is still high,” Moore said.

The Institute for Supply Management’s index of service industries in the U.S., which makes up almost 90 percent of the economy, fell to 46.4 from 47 in June, the Arizona-based group said yesterday. The index was projected to rise to 48, according to the median of 77 responses in a Bloomberg News survey.

The report from ADP, the world’s largest payroll processor, was predicted to show a 350,000 drop in jobs, according to the median estimate in a Bloomberg survey.

The Labor Department’s July jobs report is due Aug. 7. The U.S. has lost 6.5 million jobs since the recession began in December 2007, the biggest decrease of any economic slump since the Great Depression.

Heating Oil

Brent crude oil for September settlement fell 39 cents, or 0.5 percent, to $71.58 a barrel on London’s ICE Futures Europe Exchange at 10:07 a.m. in Sydney. Yesterday, it rose $1.23, or 1.7 percent, to $75.51.

U.S. supplies of distillate fuel, a category that includes heating oil and diesel, fell 1.14 million barrels to 161.5 million, the Energy Department report said. Inventories were projected to increase 1.23 million barrels, according to the median of 16 responses by analysts in the Bloomberg News survey.

Gasoline inventories declined 218,000 barrels to 212.9 million last week, the report showed. An 800,000-barrel drop was forecast, the survey showed.

Gasoline for September delivery dropped 0.6 cent, or 0.3 percent to $2.0452 a gallon in New York at 8:38 a.m. Sydney time. Yesterday, it declined 0.55 cent, or 0.3 percent, to end the session at $2.0512.