Oil Extends Declines on Stronger Dollar, Forecast Supply Gain

April 27 (Bloomberg) -- Oil extended declines after the dollar strengthened and analysts forecast an increase in U.S. crude supplies.

Oil dropped 1.1 percent yesterday as the greenback advanced against the euro, limiting investors’ need for commodities to hedge against inflation. Crude inventories probably rose 1 million barrels last week, according to analysts surveyed before an Energy Department report tomorrow.

“The market is still under the spell of macroeconomic factors like economic optimism, the dollar and high liquidity,” said Eugen Weinberg, senior analyst with Commerzbank AG in Frankfurt. “The situation in Greece has an indirect impact on the oil markets through the U.S. dollar and equity markets.”

Crude oil for June delivery dropped as much as 56 cents, or 0.7 percent, to $83.64 a barrel and was at $83.98 at 8:32 a.m. Sydney time, in electronic trading on the New York Mercantile Exchange. Yesterday, the contract fell 92 cents to $84.20.

Oil declined yesterday as the dollar advanced against the euro on concern the Greek bailout plan faces hurdles as donor countries begin ratifying the aid package. The U.S. currency was little changed at 1.3399 per euro at 8:11 a.m. Sydney time.

Tomorrow’s U.S. government report will probably show gasoline inventories climbed 500,000 barrels from 225 million the prior week, according to analyst estimates in a Bloomberg News survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 1.25 million barrels.

Refinery operating rates are estimated to have been unchanged last week, after five weeks of gains, the survey shows.

Brent crude for June settlement declined 42 cents, or 0.5 percent, to end the session at $86.83 a barrel on the London- based ICE Futures Europe exchange yesterday.