March 31 (Bloomberg) -- Crude oil fell more than $4 a barrel in New York on signs that a U.S. report will show inventories rose for the 11th time in 12 weeks as demand weakened.

Crude-oil supplies increased by 2.25 million barrels in the week ended March 28, according to the median of responses by 10 analysts surveyed by Bloomberg News before the Energy Department releases its weekly inventory data on April 2.

``We're expecting that this week's Energy Department report will show crude supplies are still building as demand slumps,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago.

Crude oil for May delivery fell $4.04, or 3.8 percent, to settle at $101.58 a barrel at 2:45 p.m. on the New York Mercantile Exchange, the biggest one-day drop since March 19. Oil is up 54 percent from a year ago and jumped 5.8 percent this quarter. Prices rose as much as $1.16 earlier today.

Brent crude for May settlement fell $3.47, or 3.3 percent, to settle at $100.30 a barrel on London's ICE Futures Europe exchange. Futures reached a record $108.02 a barrel on March 14.

Futures prices rose to a record $111.80 a barrel on March 17 in New York as investors purchased commodities in response to the plunging U.S. dollar. The currency's fall spurred interest in energy and metals as an inflation hedge.

``I'm surprised we didn't move to the downside earlier today because we closed so weak on Friday,'' said Tom Bentz, a broker at BNP Paribas in New York. ``Now it looks like we will test the $100 area in the short term. There's no headline you can point to; the market just ran out of steam.''

U.S. Stockpiles

``Refinery runs are on the low side so there's not much demand for oil,'' Bentz said. ``There is no shortage of supply, at least in the U.S.''

Refineries operated at 82.2 percent of capacity in the week ended March 21, the lowest since October 2005, the department said last week.

``Prices are so high that we are susceptible to pullbacks unless there are bullish headlines,'' said Eric Wittenauer, an energy analyst at Wachovia Securities in St. Louis. ``Demand and product support just isn't there to support these prices.''

Gasoline for April delivery fell 10.07 cents, or 3.7 percent, to close at $2.6163 a gallon in New York. Futures touched $2.7752 on March 26, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.

The April gasoline contract expired today. The more-active May futures contract fell 8.64 cents, or 3.2 percent, to $2.6271 a gallon.

Fuel Demand

Total implied fuel demand averaged 20.3 million barrels a day in the four weeks ended March 21, down 2.2 percent from a year earlier, the Energy Department said last week.

Economists surveyed by Bloomberg News forecast that the Institute for Supply Management's national manufacturing survey tomorrow will show the measure fell to the lowest in almost five years. A government report this week will show that the nation lost jobs for a third month in March, economists said. The U.S. is the world's biggest energy-consuming country.

Treasury Secretary Henry Paulson proposed to overhaul how U.S. financial markets are regulated.

Paulson's 218-page ``Blueprint for Regulatory Reform'' said more rules aren't ``the answer'' to the current period of turmoil. The former chairman of Goldman Sachs Group Inc. said the structure of regulating banks, securities firms and insurance companies is outmoded, and the Fed should expand its oversight of financial services beyond banks.

Iraq Fighting

Fighting between government forces and militiamen in Iraq eased after a truce offer from Moqtada al-Sadr. Iraq has the world's third biggest oil reserves, according to BP Plc.

An Iraqi oil pipeline that carries about 100,000 barrels a day to the Basra oil terminal was damaged by a fire started by an explosive device on March 27. Two larger pipelines, which together move about 1.5 million barrels a day of crude to the port on the Persian Gulf, were unaffected by the blast.

``We failed to hit the previous highs when the Basra pipeline was shut last week, which is important technically,'' Wittenauer said. ``This may be a sign of a further move lower.''

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: March 31, 2008 15:48 EDT