Oil Falls a Second Day on Doubts Over Pace of Recovery in U.S.

June 18 (Bloomberg) -- Crude oil fell for a second day in New York amid doubts about the pace of the economic recovery in the U.S., the world’s largest energy consumer, after an increase in jobless claims and a manufacturing slowdown.

Oil extended yesterday’s 1.1 percent drop after the Labor Department said the number of Americans seeking jobless benefits last week climbed to a one-month high. U.S. fuel consumption fell 0.9 percent to the lowest level in five weeks in the seven days ended June 11, the Energy Department reported June 16.

“The U.S. economy is facing a major structural adjustment in the wake of the financial crisis and subsequent economic slump,” said Toby Hassall, a research analyst at CWA Global Markets Ltd. “The U.S. is still the largest consumer of petroleum, so a lack of recovery in fuel demand there will have an impact on the oil market.”

Crude oil for July delivery fell as much 48 cents, or 0.6 percent, to $76.31 a barrel on the New York Mercantile Exchange. It was at $76.38 at 7:37 a.m. Singapore time. The contract lost 88 cents to settle at $76.79 yesterday. Futures are down 3.6 percent this year.

Initial jobless applications increased by 12,000 to 472,000 in the week ended June 12. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast. The number of people receiving unemployment insurance rose, while those getting extended benefits dropped.

Brent crude for August settlement rose 54 cents, or 0.7 percent, to $78.68 a barrel on the ICE Futures Europe exchange in London yesterday.

Crude Inventories

U.S. crude inventories were 8.4 percent above their five- year average last week, an increase from 7.3 percent the week before, the Energy Department said on June 16. Supplies gained 1.69 million barrels, or 0.5 percent, to 363.1 million last week, the department said. It was the first increase in three weeks as imports climbed and refinery operations declined.

Supplies at the Cushing, Oklahoma, delivery point for the New York futures, climbed 194,000 barrels to 37.6 million, near the record of 37.9 million. This gain has depressed West Texas oil relative to Brent, with the North Sea grade for August trading at a 64 cents premium to the corresponding U.S. contract.

An offshore drilling moratorium in the wake of the Gulf of Mexico oil spill could trim U.S. production by 200,000 barrels a day next year, eventually add $5 or more to the price of oil and cause the U.S. to seek more foreign crude, Adam Sieminski, chief energy economist for Deutsche Bank, said on Bloomberg television.