Oil Drops Below $86 a Barrel After Forecast U.S. Supply Gain

May 4 (Bloomberg) -- Crude oil traded below $86 a barrel in New York as analysts forecast that U.S. crude supplies increased, signaling fuel demand in the world’s biggest energy user may be slow to recover.

Oil declined for the first time in five days after analysts predicted an Energy Department report tomorrow may show U.S. crude supplies rose for the 13th time in 14 weeks as imports climbed. Inventories probably increased 1.7 million barrels in the seven days ended April 30 from 357.8 million the week before, according to the median of nine analyst estimates.

“I don’t think this is a fair value for crude at the moment given the fundamentals,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “Crude stocks are very high.”

Crude oil for June delivery dropped as much as 27 cents, or 0.3 percent, to $85.92 a barrel and was at $85.98 in electronic trading on the New York Mercantile Exchange at 9:33 a.m. Sydney time. Yesterday, the contract gained rose 4 cents to $86.19 on the New York Mercantile Exchange.

Oil rose as much $1 a barrel yesterday after the Institute for Supply Management’s factory index increased to 60.4, the highest level since June 2004. Economists projected a gain to 60, according to a Bloomberg News survey. Europe’s manufacturing industry expanded at the fastest pace in almost four years in April as companies increased production to meet export orders, London-based Markit Economics said yesterday.

Brent crude for June settlement climbed $1.50, or 1.7 percent, to end the session at $88.94 a barrel on the ICE Futures Europe exchange in London yesterday.