Oil Trades Below $77 After Falling as U.S. Supplies Increase

Dec. 3 (Bloomberg) -- Crude oil traded below $77 a barrel in New York after a government report showed a gain in U.S. stockpiles last week as consumption declined in the world’s biggest energy consumer.

Oil fell 2.3 percent yesterday as supplies of gasoline climbed 4 million barrels to 214.1 million, the Energy Department said. Prices also declined as the dollar rose against the euro, limiting investors’ need for physical assets such as commodities to hedge against inflation.

“Gasoline was a bit of a concern and the dollar was a little bit firmer, and that has stopped oil from bumping along too much,” Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney, said by telephone. “Energy is not the flavor of the day.”

Crude oil for January delivery rose 20 cents to $76.80 a barrel in electronic trading on the New York Mercantile Exchange at 11:16 a.m. in Sydney. Yesterday, the contract fell $1.77 to settle at $76.60. Prices are up 72 percent this year.

Stockpiles of crude rose 2.09 million barrels to 339.9 million, the highest level since August, the Energy Department said. Inventories were forecast to decline by 400,000 barrels, according to the median of 15 analyst estimates in a Bloomberg News survey.

Total U.S. daily fuel demand averaged 18.5 million barrels in the four weeks ended Nov. 27, down 3.2 percent from a year earlier, the Energy Department report showed yesterday. Consumption slipped by 497,000 barrels a day last week.

Middle East Tension

“We might see a little bit of Middle Eastern tension start to pick up,” Barratt said. “If things in Iran start to heat up a little bit, then we’ll probably get a little bit of a premium start to be built into the market.”

Five British yachtsmen detained by Iran’s navy in the Persian Gulf last week were released yesterday, state-run media reported. Iran’s Revolutionary Guards Corps said questioning of the sailors made it clear they had entered Iranian waters by mistake, the Fars news agency reported.

Iran announced an expansion of its nuclear program in defiance of United Nations demands, a move that the Obama administration said will further isolate the country from the international community.

President Mahmoud Ahmadinejad’s Cabinet ordered the Atomic Energy Organization of Iran to begin building 10 uranium enrichment sites within two months, the Islamic Republic News Agency reported on Nov. 29.

Refinery Rates

U.S. refineries operated at 79.7 percent of capacity, down 0.6 percentage point from the previous week, according to the department’s report. A 0.2 percentage-point gain was forecast.

Oil also dropped after a report showed that output in Russia, the world’s largest producer, remained at a post-Soviet high for a second month in November as OAO Rosneft ramped up the Vankor field in northern Siberia.

Production was unchanged from October at 41.22 million metric tons, or 10.07 million barrels a day, the Energy Ministry’s CDU-TEK unit said in an e-mailed statement yesterday. Output rose 2.9 percent from a year earlier.

Rosneft said last week it plans to raise output at Vankor by as much as 50 percent to an average of 270,000 barrels a day next year. It anticipates peak production of more than 500,000 barrels a day from the field.

Brent crude oil for January settlement fell $1.47, or 1.9 percent, to end the session at $77.88 a barrel on the London- based ICE Futures Europe exchange yesterday.