Oil Extends Declines as U.S. Refining Rates, Fuel Demand Drop

Jan. 22 (Bloomberg) -- Crude oil fell below $76 a barrel and is poised for a second weekly decline after a report showed U.S. refineries slashed operating rates as fuel demand dropped.

Oil dropped for a third day after the U.S. Energy Department said that plants ran at 78.4 percent of capacity last week, the lowest rate outside the Atlantic hurricane season since at least 1989. Gasoline stockpiles surged to the highest level since March 2008. Fuel consumption in the past four weeks was 1.8 percent lower than a year earlier.

“The market would be pretty concerned with refinery rates,” Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne, said by phone. “It’s flagging weaker demand and also that supplies are ample,” he said.

Crude oil for March delivery dropped as much as 46 cents, or 0.6 percent, to $75.62 a barrel in electronic trading on the New York Mercantile Exchange. It was at $75.73 at 11:27 a.m. Sydney time. Yesterday, the contract fell 2.1 percent to $76.08, the lowest settlement since Dec. 22.

Oil has dropped 2.9 percent this week as falling equity markets dented investor confidence and the rising dollar reduced the investment appeal of commodities priced in the currency.

The dollar yesterday reached its highest against the euro since July 30 on a report that the European Union was preparing a loan for Greece. The report was denied by Finance Minister George Papaconstantinou.

The U.S. currency was at $1.4091 per euro at 11:15 a.m. Sydney time, from $1.4085 yesterday.

U.S. Refinery Rates

Analysts had expected U.S. refining rates to decline to about 80.8 percent from 81.3 percent a week earlier, according to a Bloomberg News survey.

Gasoline inventories rose 3.95 million barrels to 227.4 million in the week ended Jan. 15, the Energy Department report showed. Stockpiles were forecast to climb by 1.75 million barrels, according to the median of 18 analyst estimates.

Inventories of crude oil fell 471,000 barrels to 330.6 million, the department said. Supplies were forecast to rise 2.45 million barrels.

Supplies of distillate fuel, a category that includes heating oil and diesel, fell 3.26 million barrels to 157.1 million. Analysts were split over whether stockpiles increased or declined over the period.

Brent crude oil for March settlement declined $1.74, or 2.3 percent, to $74.58 a barrel on the London-based ICE Futures Europe exchange yesterday.