Oil Drops a Second Day After Unexpected Rise in Gasoline Supply

Oct. 29 (Bloomberg) -- Crude oil dropped for a second day in New York after a government report yesterday showed an unexpected increase in U.S. gasoline stockpiles and crude supplies rose to a two-month high.

Oil fell the most in a month yesterday as gasoline inventories climbed 1.62 million barrels last week, the Energy Department said. A 1 million-barrel decline was forecast, according to a Bloomberg News survey. Prices also dropped as the dollar gained against the euro.

“The inventories report had a bearish tilt to it and it’s not surprising to see oil lose some ground,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “Gasoline inventories were greater than expected and fuel demand posted a week-on-week decline.”

Crude oil for December delivery fell as much as 43 cents, or 0.6 percent, to $77.03 a barrel in electronic trading on the New York Mercantile Exchange. It was at $77.17 at 10:41 a.m. Sydney time. Yesterday, the contract dropped $2.09, or 2.6 percent, to $77.46, the lowest settlement since Oct. 14. Prices have gained 73 percent since the start of the year.

The dollar traded at $1.4724 per euro at 10:37 a.m. Sydney time after reaching $1.4691, the strongest level since Oct. 12. A stronger dollar reduces the appeal of commodities to investors looking for an inflation hedge.

“Market sentiment has taken a significant turn to the negative side,” Hassall said. “We have seen the dollar claw back some ground on the back of that.”

Crude Supplies

Inventories of crude oil rose 778,000 barrels to 339.9 million last week, the Energy Department report showed yesterday. Supplies of distillate fuel, a category that includes heating oil and diesel, declined 2.13 million barrels to 167.8 million. Inventories were 29 percent higher than the five-year average for the week, the department said.

Refineries operated at 81.8 percent of capacity, up 0.7 percentage point from the previous week, the report showed. Refiners produced 8.83 million barrels of gasoline a day, up 4.5 percent from the prior week.

Fuel demand dropped 0.8 percent to an average of 18.5 million barrels a day last week, the report showed. Imports of crude oil increased 2.2 percent to 8.89 million barrels a day last week, the report showed. Fuel imports climbed 6.3 percent to 2.54 million barrels a day.

The Standard & Poor’s 500 Index retreated 2 percent to 1,042.63 in New York yesterday. The Dow Jones Industrial Average lost 119.48 points, or 1.2 percent, to 9,762.69. Australia’s benchmark S&P/ASX 200 Index dropped 1.8 percent at 10:38 a.m. Sydney time.

Brent crude oil for December settlement dropped $2.06, or 2.6 percent, to end the session at $75.86 a barrel yesterday on the London-based ICE Futures Europe exchange.