Oil Extends Decline as Dollar Surges, China Manufacturing Slows

May 5 (Bloomberg) -- Crude oil dropped for a second day after the dollar strengthened against the euro, curbing the appeal of commodities to investors, and a slowdown in Chinese manufacturing sent global equities lower.

Oil fell after declining the most in three months yesterday as the dollar rose on concern the Greek debt crisis will spread. A Chinese purchasing managers’ index dropped to a six-month low. Futures also decreased as an American Petroleum Institute report showed U.S. crude inventories gained 2.95 million barrels last week.

“The major concern at the moment is the manufacturing in China slowing down and the contagion from Greece spreading,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney.

Crude oil for June delivery fell 57 cents, or 0.7 percent, to $82.17 a barrel, in electronic trading on the New York Mercantile Exchange at 10:08 a.m. Sydney time. Yesterday, the contract dropped $3.45, or 4 percent, to $82.74, the lowest settlement since April 27. It was the biggest single-session drop since Feb. 4

The dollar traded little changed at $1.2985 a euro at 10:09 a.m. Sydney time, after rising 1.6 percent yesterday. The Standard & Poor’s 500 Index fell 2.4 percent to 1,173.60, the most since February.

A purchasing managers’ index for China released yesterday by HSBC Holdings Plc declined to 55.4 from 57 in March, signaling government attempts to cool the world’s second-biggest energy consuming country are working.

Crude Supplies

An Energy Department report today will probably show that U.S. stockpiles of crude oil rose 1 million barrels in the seven days ended April 30, based on the median of estimates from 16 analysts surveyed by Bloomberg News.

The API 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.

Gasoline supplies rose 1.46 million barrels last week, according to the API report. Stockpiles of distillate fuel, a category that includes heating oil and diesel, increased 1.37 million barrels.

Brent oil for June settlement dropped 32 cents, or 0.4 percent, to $85.35 a barrel, on the London-based ICE Futures Europe exchange at 10:08 a.m. Sydney time. Yesterday, the contract declined $3.27, or 3.7 percent, to $85.67.