Crude Oil Drops Below $79 as Dollar Climbs, Stockpiles Increase

Oct. 21 (Bloomberg) -- Crude oil in New York dropped below $79 a barrel as the dollar climbed and an industry report showed an increase in crude stockpiles in the U.S., the world’s biggest energy consumer.

Oil fell for a second day after U.S. equities declined and the dollar rose from a 14-month low against the euro, limiting investor need for commodities to hedge against inflation. The American Petroleum Institute reported that crude supplies rose 3.85 million barrels.

“The U.S. dollar strengthening has helped pull the oil price off its highs,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “The API data showed quite a decent build in crude inventories. That’s probably also a dampening influence on the oil price.”

Crude oil for December delivery dropped as much as 58 cents, or 0.7 percent, to $78.54 a barrel in electronic trading on the New York Mercantile Exchange. It was at $78.58 a barrel at 9:31 a.m. Singapore time. Yesterday, the contract dropped 84 cents, or 1.1 percent, to end the session at $79.12. The November contract expired yesterday at $79.09, down 52 cents.

U.S. stocks fell yesterday as a disappointing report on housing starts overshadowed better-than-estimated earnings at companies from Apple Inc. to Caterpillar Inc. The Standard & Poor’s 500 Index slipped 0.6 percent in New York and the Dow Jones Industrial Average decreased 0.7 percent. Australia’s benchmark S&P/ASX 200 Index declined 0.4 percent at 10:36 a.m. in Sydney.

The dollar gained for a second day against the euro, trading at $1.4921 per euro at 9:53 a.m. in Tokyo from $1.4945 yesterday in New York.

Crude Stockpiles

An Energy Department report due today will show that U.S. inventories of oil rose 1.5 million barrels last week, according to the median of 15 estimates by analysts in a Bloomberg News survey. The department is scheduled to release its weekly report at 10:30 a.m. in Washington.

Crude oil inventories rose to 343 million barrels last week, the API report showed, the highest in seven weeks. Gasoline supplies declined 558,000 barrels to 209.8 million. Distillate fuel stockpiles, a category that includes heating oil and diesel, dropped 998,000 barrels to 167 million, the report showed.

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

Housing starts rose 0.5 percent in September to an annual rate of 590,000 and the pace in August was lower than previously estimated, according to the Commerce Department. Economists in a Bloomberg News survey forecast a rate of 610,000.

Brent crude oil for December settlement declined as much as 61 cents, or 0.8 percent, to $76.63 a barrel on the London-based ICE Futures Europe exchange, and was at $76.69 at 9:27 a.m. Singapore time.