Oil Trades Near Two-Week Low as Supply Gains Counter Storm Risk

Aug. 17 (Bloomberg) -- Crude oil traded near a two-week low on speculation declining seasonal demand in the U.S. and rising stockpiles will ensure adequate supplies during the North Atlantic hurricane season.

Oil fell 4.8 percent last week after an unexpected decline in U.S. consumer confidence and reports showing refining and gasoline demand at their lowest in more than 12 weeks. Tropical Storm Claudette, the first to make landfall in the U.S. this season, may strengthen as it approaches western Florida’s gulf coast, the National Hurricane Center said.

High stockpiles mean “the supply-risk premiums coming out of the hurricane season will be relatively mild,” said Toby Hassall, analyst at Commodity Warrants Australia Pty in Sydney. Investors are “not going to be quite as jittery given we don’t have that demand-supply tightness” of previous years, he said.

Crude oil for September delivery was at $67.45 a barrel, down 6 cents, in after-hours electronic trading on the New York Mercantile Exchange at 7:33 a.m. in Singapore.

The contract fell $3.01 to $67.51 on Aug. 14, the lowest settlement since July 30, after the Reuters/University of Michigan preliminary index of consumer sentiment fell to a five- month low, equities dropped and the dollar gained against the euro, reducing the appeal of commodities. Oil climbed to an eight-month high of $73.38 on June 30.

Crude oil inventories in the U.S., the world’s largest energy consumer, rose the past three weeks as refiners reduced gasoline production with the end of the summer driving season. Distillate stockpiles, which include diesel and heating oil, are near their highest in 25 years.

Gulf of Mexico

Rigs and platforms in the northern Gulf of Mexico accounted for about 23 percent of U.S. oil production last year, according to Energy Department data.

Hurricane Ike last September shut almost all the region’s oil production and about 20 percent of the nation’s refining capacity. Hurricanes Katrina and Rita, which struck the region in 2005, killed more than 1,800 and did more than $71.3 billion of damage.

Tropical Storm Claudette, with winds near 50 miles (80 kilometers) an hour, was about 120 miles southeast of Pensacola and approaching the Florida coast at about 14 miles an hour, the Hurricane Center said in an advisory on its Web site.

Ana, east of the Leeward Islands, has weakened to a tropical depression, the center said. Tropical Storm Bill in the mid-Atlantic may strengthen to a hurricane as it heads northwest in the next 24 hours, the center said.

Brent crude oil for October settlement fell 8 cents, or 0.1 percent, to $71.36 a barrel on London’s ICE Futures Europe exchange. It dropped 3.4 percent to $71.44 on Aug.14.

Hedge-fund managers and other large speculators reduced their bets on rising New York oil futures last week, according to U.S. Commodity Futures Trading Commission data.

Speculative net-long positions, the difference between orders to buy and sell the commodity, fell 21 percent to 27,077 contracts in the week ended Aug. 11, the commission said.