Oil Declines to Seven-Month Low as Euro Weakens Against Dollar

May 19 (Bloomberg) -- Crude oil slumped to a seven-month low in New York as the dollar climbed against the euro, curbing the investment appeal of commodities, and after a U.S. industry report showed an increase in stockpiles of gasoline.

Oil dropped for a seventh day after the 16-nation currency touched a four-year low versus the greenback on concern European nations will struggle to meet austerity requirements. Gasoline inventories rose 981,000 barrels last week, the American Petroleum Institute said yesterday.

“The trend is still down for the price of oil,” said Mike Sander, an investment adviser a Sander Capital Advisors in Seattle. “As long as the euro continues to sink like a rock, the price of oil will remain on the defensive. The June contract saw oil break through support at the $70 barrel level and we could see oil hit $67.”

Crude oil for June delivery dropped as much as $1.32, or 1.9 percent, to $68.09 a barrel in electronic trading on the New York Mercantile Exchange, the lowest intraday price since Oct. 5. It was at $68.26 at 9:21 a.m. in Sydney. Yesterday, the contract fell 67 cents to $69.41 a barrel, the lowest settlement since Sept. 29. Futures rose as much as 3.5 percent to $72.52 yesterday.

The dollar traded at $1.2182 against the euro at 8:47 a.m. Sydney time, after climbing 1.6 percent yesterday. The euro fell after Germany said it will ban naked short-selling and naked credit-default swaps of euro-area sovereign debt and the Bank of Italy allowed lenders to exclude losses on government bonds.

Crude Supplies

An Energy Department report today will probably show that U.S. inventories of crude oil climbed for the 15th time in 16 weeks. Stockpiles rose 500,000 barrels in the seven days ended May 14 from 362.5 million the week before, according to the median of 15 analyst estimates in a Bloomberg News survey.

Supplies of distillate fuel, a category that includes heating oil and diesel, climbed 1 million barrels from 153.8 million, according to the survey. Gasoline stockpiles declined 900,000 barrels from 222.1 million the prior week.

Crude supplies declined 794,000 barrels last week, according to the American Petroleum Institute report.

The Petroleum Institute 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.

Brent crude oil for July delivery declined 67 cents, or 0.9 percent, to end the session at $74.43 on the London-based ICE Futures Europe exchange yesterday.