Crude Oil Falls

Crude oil fell in New York, paring yesterday’s 9 percent gain, on concern the rally will prove unsustainable as fuel demand declines.

A U.S. government report tomorrow will probably show that stockpiles of crude increased for a ninth week, according to a Bloomberg survey. Fuel demand in the world’s largest economy fell 5.2 percent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said last week. Oil climbed more than $4 a barrel yesterday, following European and U.S. equities higher.

Crude oil for January delivery fell as much as $3.37, or 6.2 percent, to $52.13 a barrel on the New York Mercantile Exchange. It traded at $51.32 at 1:04 p.m. London time.

The contract extended losses as the dollar gained, trading for $51.76 at 12:50 p.m. London time. A stronger U.S. currency may deter foreign investors from buying commodities.

Futures have dropped 64 percent since reaching a record $147.27 a barrel on July 11. Yesterday, the contract increased 9.2 percent to settle at $54.50 a barrel, the biggest one-day gain since Nov. 4, after the government guaranteed $306 billion in Citigroup assets.

Oil ministers from the 13-nation Organization of Petroleum Exporting Countries are scheduled to meet on Nov. 29 in Cairo. Slowing global demand growth has left a 1 million barrel-a-day oversupply that needs to be removed by the year-end, Venezuela’s oil minister, Rafael Ramirez, said on Nov. 23. The group is due to hold another summit on Dec. 17 in Algeria.

Russia may coordinate oil production cuts with OPEC as the world’s second-largest crude exporter reels from falling energy prices. The country can’t rule out cutting output together with OPEC, Energy Minister Sergei Shmatko said at a conference in New Delhi today.

Brent crude oil for January settlement fell as much as $2.62, or 4.9 percent, to $51.31 a barrel on London’s ICE Futures Europe exchange. It was at $51.71 a barrel at 12:51 p.m. London time. The contract yesterday increased $4.74, or 9.6 percent, to settle at $53.93 a barrel.

U.S. supplies of distillate fuel, a category that includes heating oil and diesel, fell for a second week because of cold weather along the East Coast, a Bloomberg News survey of analysts showed.

Distillate stockpiles dropped 1 million barrels last week from 126.9 million barrels the week before, according to the median of nine analyst estimates before an Energy Department report this week.

Crude-oil supplies may have risen 1.1 million barrels from 313.5 million barrels the week before.

Gasoline inventories probably increased 500,000 barrels from 198.6 million barrels the week before, according to the survey. Refineries probably operated at 85.2 percent of capacity, up 0.3 percentage point from the week before, the survey showed.

Crude-oil supplies may have risen 1.1 million barrels from 313.5 million barrels the week before.

The U.S. dollar advanced 0.5 percent to $1.2817 against the euro as of 12:51 p.m. London time, from $1.2887 yesterday,,
11/25/2008 5:18:38 AM