Oil Trades Below $75 on Dollar Strength, Forecast Supply Gain

Jan. 27 (Bloomberg) -- Crude oil traded below $75 a barrel after falling as the dollar strengthened against the euro, reducing the appeal of commodities as an alternative investment.

Oil dropped 0.7 percent yesterday as the U.S. currency gained against its major counterparts on speculation China will take further steps to cool its economy. A U.S. government report today will probably show oil supplies in the biggest energy using nation rose, according to a Bloomberg News analyst survey.

“The short-term outlook is really not showing too much brightness,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. “We are still waiting for the U.S. and Europe to show some material improvement in their economies.”

Crude oil for March delivery traded at $74.67 a barrel, down 4 cents, in electronic trading on the New York Mercantile Exchange at 10:59 a.m. Sydney time. Yesterday, the contract dropped 55 cents to settle at $74.71.

Oil stockpiles reported by the Energy Department probably climbed 1.58 million barrels in the week ended Jan. 22 from 330.6 million the prior week, according to the median of 18 analyst estimates in the Bloomberg News survey of analysts.

Refining rates, already at their lowest level outside the Atlantic hurricane season since at least 1989, probably fell 0.1 percentage point.

Crude Supplies

Inventories of crude oil fell by 2.23 million barrels last week to 326.1 million, the American Petroleum Institute said yesterday. Supplies of distillate fuel, a category that includes heating oil and diesel, dropped by 1.98 million barrels.

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

Crude dropped yesterday on speculation that oil demand may wane in China, where banks have begun restricting new loans in response to a push by regulators to contain credit.

Lending growth in China slowed in the third week of January from the month’s first two weeks, the Shanghai Securities News reported yesterday, citing unidentified people.

“China has been underpinning demand for oil and other commodities, so the idea that they’re going to rein things in is certainly a negative for sentiment,” Hassall said.

The dollar traded at $1.4082 a barrel at 10:59 a.m. Sydney time, from $1.4072 yesterday.

Brent oil for March settlement declined 40 cents, or 0.5 percent, to $73.29 a barrel on the London-based ICE Futures Europe exchange yesterday.