Oil Drops Below $70 on Concern European Debt Crisis May Persist

May 25 (Bloomberg) -- Crude oil declined, falling below $70 a barrel in New York, after the seizure of a Spanish bank fueled concern the fallout from Europe’s debt crisis isn’t over.

Oil gave up yesterday’s 0.2 percent gain as the euro dropped against the dollar, reducing the investment appeal of commodities. U.S. supplies of crude oil probably rose for the 16th time in 17 weeks amid ample imports, according to analysts surveyed by Bloomberg News before a government report tomorrow.

“Oil prices have gone down $20 since the beginning of May and I would say about half of it would be attributed to the debt crisis,” Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington, said on Bloomberg Television. “It is a change of sentiment that has weighed on the oil market.”

Crude oil dropped 37 cents, or 0.6 percent, to $69.84 a barrel, in electronic trading on the New York Mercantile Exchange at 8:44 a.m. Sydney time. Yesterday, the contract rose 17 cents to settle at $70.21.

Crude oil rose yesterday on speculation that China may delay economic tightening measures and signals that U.S. economic growth will accelerate.

The dollar traded 0.3 percent higher at $1.2336 a euro at 8:30 a.m. Sydney time, after gaining 1.6 percent yesterday. The euro fell against all of its most-traded counterparts as the Bank of Spain said on May 22 it appointed a provisional administrator to run CajaSur, a savings bank crippled by property-loan defaults.

Crude Supplies

U.S. crude stockpiles rose 250,000 barrels in the seven days ended May 21 from 362.7 million the previous week, according to the median of 13 analyst estimates before tomorrow’s Energy Department report. Seven of the respondents forecast a gain and six estimated a decline.

Refineries probably operated at 87.9 percent of capacity last week, unchanged from the previous week, according to the median of analyst responses. Refineries operated at 89.6 percent of capacity in the week ended April 30, the highest level since May 2008.

China expanded daily crude processing volume by 17 percent to a record 8.4 million barrels a day in April, according to data released May 11 by China Mainland Marketing Research Co., which compiles information for the government.

The U.S. and China are responsible for 33 percent of global oil consumption, according to BP Plc, which publishes its Annual Statistical Review of World Energy each June.

Brent crude oil for July settlement slipped 51 cents, or 0.7 percent, to end the session at $71.17 on the London-based ICE Futures Europe exchange yesterday.