Crude Oil Drops After Unexpected U.S. Supply Gain, Dollar Rise

Sept. 24 (Bloomberg) -- Crude oil declined for a second day in New York after a U.S. Energy Department report showed an unexpected increase in fuel stockpiles in the world’s largest energy consuming nation.

Crude inventories climbed 2.86 million barrels last week, the department said yesterday, compared with the 1.4 million- barrel drop forecast in a Bloomberg News analyst survey. Oil also fell after the dollar rose against the euro, reducing the attractiveness of commodities as a hedge against inflation.

“The inventory report showed a build in crude oil and petroleum, helping put pressure on oil to trade lower,” said Mike Sander, an investment adviser at Sander Capital in Seattle. “With equities closing at the low for the session, it pushed oil down even further in after hours trading. If the trend can continue, oil could trade below $68” today.

Crude oil for November delivery fell as much as 87 cents, or 1.3 percent, to $68.10 a barrel on the New York Mercantile Exchange. It was trading at $68.60 at 10:33 a.m. Sydney time. Yesterday, the contract dropped $2.79, or 3.9 percent, to settle at $68.97. Prices have gained 53 percent since January.

The dollar traded at $1.4717 per euro at 8:08 a.m. in Tokyo from $1.4735 yesterday. U.S. equities fell yesterday amid concern the Federal Reserve is nearing the end of its efforts to lift the economy out of recession.

Fuel Stockpiles

“There are big concerns around the supply side,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. “We didn’t see much of a drawdown in gasoline supplies over the summer months in the U.S., and we continue to see these builds of distillate stocks ahead of winter.”

Crude oil inventories rose to 335.6 million barrels, the biggest increase since the week ended July 24, the Energy Department report showed. The gain left stockpiles 9.1 percent above the five-year average. Imports climbed 10 percent to 9.79 million barrels a day, the highest since July.

Stockpiles of distillate fuels rose 2.96 million barrels to 170.8 million, the highest since January 1983, according to the department. Analysts forecast a 1.45 million-barrel gain.

Gasoline supplies rose 5.41 million barrels to 213.1 million, the biggest increase since January, according to the report. That left stockpiles 6.5 percent above the five-year average for the period. A 500,000 barrel gain was forecast.

Refineries operated at 85.6 percent of capacity last week, down 1.4 percentage points from the previous week, the Energy Department said. U.S. refiners often idle units for maintenance in September and October as gasoline demand drops and before heating-oil use increases.

FOMC

The Fed, following a two-day policy meeting, changed the wording in the final paragraph of its statement to say it will continue to employ a “wide range of tools” to bolster the economy. In its August statement, it said it would use “all available” tools.

The Standard & Poor’s 500 Index lost 0.3 percent in New York yesterday. The Dow Jones Industrial Average decreased 12.01 points, or 0.1 percent, to 9,817.86.

Japanese stocks rose as analysts’ upgrades boosted shares of Toshiba Corp. and Fast Retailing Co., while resource- related stocks declined on lower commodity prices. The Nikkei 225 Stock Average added 0.3 percent of 9:09 a.m. in Tokyo. The broader Topix index rose 0.2 percent to 941.39.

U.S. fuel consumption dropped 3.3 percent to 18.5 million barrels a day, the lowest since the week ended June 26. Gasoline use slipped 2.3 percent to 8.79 million barrels a day, the lowest since January.

Brent crude for November settlement dropped as much as 56 cents, or 0.8 percent, to $67.43 a barrel on the London-based ICE Futures Europe exchange. It was at $67.72 at 10:35 a.m. Sydney time. Yesterday, the contract fell $2.54, or 3.6 percent, to end the session at $67.99 a barrel.