Oil Set for Biggest Weekly Drop Since July on Recovery Concern

Sept. 25 (Bloomberg) -- Oil in New York is poised for its biggest weekly drop since July after U.S. sales of existing homes unexpectedly slumped, bolstering skepticism about the pace of recovery in the biggest energy consuming nation.

Oil has dropped 9 percent this week as an Energy Information Administration report showed a gain in U.S. fuel stockpiles, boosting speculation of a supply glut. Prices are also under pressure from a stronger dollar, which reduces the appeal of commodities as an inflation hedge.

“The home sales data in the U.S. was a trigger that contributed to a tumble in the oil price,” said David Moore, a commodity strategist with Commonwealth Bank of Australia. “The oil data from the EIA is relatively bearish, and on top of that the U.S. dollar recovered a little bit of ground.”

Crude oil for November delivery traded at $65.87 a barrel, down 2 cents, on the New York Mercantile Exchange at 9:56 a.m. in Sydney. Futures, which dropped 4.5 percent yesterday, are headed for the biggest decline since the week ended July 10. Prices have advanced 48 percent since the start of the year.

U.S. equities fell for a second day yesterday as sales of existing homes slumped and the Federal Reserve said it will cut the size of two programs meant to bolster credit markets. The Standard & Poor’s 500 Index lost 1 percent in New York and the Dow Jones Industrial Average slipped 0.4 percent.

The dollar gained 0.1 percent to $1.4649 per euro at 9:57 in Sydney, from $1.4666 yesterday.

Supplies Increase

“We expect a hesitant recovery in the U.S. and in that context we’re going to get bits of data that disappoint, and that’s what we saw last night,” Moore said.

Supplies of crude oil rose 2.86 million barrels, to 335.6 million, the biggest increase since the week ended July 24, according to the Energy Department report released Sept. 23. Analysts had expected a 1.4 million-barrel decrease. The gain left stockpiles 9.1 percent above the five-year average.

U.S. gasoline stockpiles surged 5.41 million barrels last week, more than 10 times the gain forecast by analysts in a Bloomberg News survey, according to the report. Demand for the fuel slipped 2.3 percent to 8.79 million barrels a day, the lowest since January.

Inventories of distillate fuel, a category that includes heating oil and diesel, rose 2.96 million barrels, almost double analyst estimates.

“There has been a lot of talk about green shoots, but we are still shedding jobs and oil demand is still going to drop by 2 million barrels this year,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “There comes a point when you have to pay attention to the fundamentals.”

Brent crude for November settlement rose 1 cent to $64.83 a barrel on the London-based ICE Futures Europe exchange at 10:06 a.m. Sydney time. Yesterday, the contract dropped $3.17, or 4.7 percent, to $64.82.

Dollar Rises Versus Euro as Slow Recovery Curbs Risk Appetite

Sept. 25 (Bloomberg) -- The dollar advanced for a third-day against the euro, the longest strength of gains in a month, as signs of a slow recovery from the recession reduced demand for higher-yielding assets funded in the greenback.

The dollar headed for its first weekly advance in three weeks against the 16-nation currency before a report forecast to show that growth in U.S. durable goods orders slowed last month. The pound reached the lowest in more than three months against the dollar after the Newcastle Journal reported that Bank of England Governor Mervyn King said the pound’s drop is “very helpful” in rebalancing the U.K. economy.

“The market priced in prospects of a global recovery too much and too fast,” said Daisaku Ueno, chief analyst at Gaitame.Com Research Institute Ltd., a unit of Japan’s largest currency margin company. “The sustainability of gains for higher-yielding currencies at the expense of the dollar may be called into question.”

The dollar traded at $1.4655 per euro at 9:07 a.m. in Tokyo from $1.4666 yesterday in New York. The U.S. currency touched $1.4844 on Sept. 23, the weakest since Sept. 22, 2008. The dollar was at 90.90 yen from 91.27 yen. The yen fetched 133.24 per euro from 133.86 yesterday.

The pound fell to $1.5918, the lowest since June 8, from $1.6059 yesterday in New York. The U.K. currency dropped to 91.93 pence per euro, reaching the weakest level since April 1.

Orders for durable goods in the U.S. meant to last several years increased 0.4 percent in August, after rising 5.1 percent the previous month, according to the median forecast of 75 economists surveyed by Bloomberg News. The Commerce Department’s report is due for release at 8:30 a.m. in Washington.

Adding to signs of a slow recovery, the National Association of Realtors reported yesterday that purchases of existing U.S. homes decreased 2.7 percent in August to a 5.10 million annual pace.

G-20 Meeting

The U.S. currency rose against 15 out of its 16 most-active counterparts after Treasury Secretary Timothy Geithner said the U.S. has a “special responsibility” to support the dollar’s role as the world’s reserve currency, spurring speculation that Group of 20 leaders will discuss the falling greenback.

“A strong dollar is very important in the United States,” Geithner said in response to a question at a press conference yesterday in Pittsburgh, where the G-20 nations started two days of talks.

His comments came after German Chancellor Angela Merkel told reporters in Berlin yesterday that G-20 leaders would discuss exchange rates at the summit in Pittsburgh, which ends today. The G-20 is composed of the leading industrial and developing economies, accounting for about 85 percent of the global economy.