Crude Oil Declines as Optimism Over China’s Currency Move Fades

June 22 (Bloomberg) -- Crude oil declined for the first time in three days as optimism faded that China’s plan to add more flexibility in the yuan’s fixed exchange rate would strengthen the global economic recovery.

Oil gave up yesterday’s gains as U.S. stocks fell and the dollar rose against the euro, limiting investors’ need for commodities to hedge against inflation. The People’s Bank of China said June 20 that it’s abandoning the yuan peg adopted during the global financial crisis to shield exporters.

“I don’t think an increase in the value of the yuan will increase China’s demand for oil,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle.

Crude oil for July delivery dropped 57 cents, or 0.7 percent, to $77.25 a barrel in electronic trading on the New York Mercantile Exchange at 8:00 a.m. Sydney time. Yesterday, the contract rose 64 cents, or 0.8 percent, to $77.82.

China, the world’s most-populous nation, consumes more oil than any country except the U.S. China’s central bank said there’s no basis for “large-scale” moves in its currency even as it pledged increased exchange-rate flexibility.

The dollar traded little changed at $1.2320 a euro at 8:41 a.m. Sydney time, after climbing 0.6 percent yesterday.

U.S. inventories of crude oil probably dropped 1 million barrels last week, according to the median of 10 analyst estimates in a Bloomberg News survey before an Energy Department report tomorrow.

Brent crude for August settlement advanced 60 cents, or 0.8 percent, to $78.82 on the ICE Futures Europe exchange in London yesterday.