Oil Pares Gain, Trades Below $77 on Increase in U.S. Stockpiles

Feb. 3 (Bloomberg) -- Oil pared gains and traded below $77 a barrel in New York after an industry report showed a larger- than-expected increase in crude stockpiles in the U.S., the world’s biggest energy consumer.

Oil declined for the first day in three after the American Petroleum Institute reported crude inventories rose 4.72 million barrels last week. An Energy Department report today may show stockpiles increased 400,000 barrels, according to a Bloomberg News survey of analysts.

The API crude inventory figure “is a bit more than expected and that could be the reason for a little bit of weakness,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “The strength over the past few days partially has been the low levels it has been coming off,” he said.

Crude oil for March delivery dropped as much as 43 cents, or 0.6 percent, to $76.80 a barrel in electronic trading on the New York Mercantile Exchange. It was at $76.81 at 10:16 a.m. Singapore time. Yesterday, the contract climbed $2.80 to $77.23, the biggest gain since Sept. 30.

The Energy Department report today will probably show that supplies of distillate fuel, a category that includes heating oil and diesel, dropped 1.15 million barrels last week, according to the survey. Gasoline stocks probably climbed 1.4 million barrels last week.

The Energy Department is scheduled to release its weekly report at 10:30 a.m. today in Washington.

‘Re-stocking Story’

Oil advanced yesterday as a report showed sales of previously owned homes strengthened in December and the dollar weakened, spurring investors to buy raw materials as an alternative investment. Prices also climbed as U.S. equities rose after profit at companies from Lexmark International Inc. to D.R. Horton Inc. topped estimates.

The contract climbed 2.1 percent on Feb. 1 after a report showed manufacturing in the U.S. increased at the fastest pace since 2004. The Institute for Supply Management’s factory index climbed to 58.4 in January from December’s 54.9. Readings of more than 50 signal an expansion. Manufacturing accounts for about 12 percent of the economy.

“There is some question as to whether that is a re- stocking story, whether businesses ran down stocks so heavily and now they’re having to increase production just to increase inventories again,” Westmore said. “There is a little bit of uncertainty around it.”

U.S. gasoline futures climbed 4.4 percent yesterday after a report showed demand rose to the highest since Dec. 18. Motorists bought an average 9.42 million barrels a day in the week ended Jan. 29, according to MasterCard Inc.’s SpendingPulse report. Consumption rose 0.5 percent from the prior week.

Brent crude oil for March settlement was at $75.68 a barrel, down 38 cents, on the London-based ICE Futures Europe exchange at 10:15 a.m. Singapore time. The contract rose $2.95, or 4 percent, to $76.06 a barrel yesterday.