March 19 (Bloomberg) -- Oil fell on forecasts that U.S. crude inventories gained last week as the world's largest economy continued to slow.

An Energy Department report due later today is expected to show that U.S. stockpiles rose for the ninth week in 10, according to a Bloomberg survey. The U.S. Federal Reserve said that ``the outlook for economic activity has weakened further'' as it cut interest rates yesterday.

``Stock data over the past six weeks has shown how weak demand has become and how buoyant supplies are,'' said Helen Henton, head of commodity research at London-based Standard Chartered Plc. ``Bearish data today could be pivotal in bringing prices lower.''

Crude oil for April delivery fell as much as $2.35, or 2.2 percent, to $107.07 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $107.35 at 12:42 p.m. in London.

The April oil contract expires at the end of today's trading on the Nymex. The more active May contract was down $2.21 at $106.28 a barrel at 12:43 a.m. in London.

Oil, up 93 percent from a year ago, touched $111.80 a barrel March 17, the highest since trading began in 1983.

The Energy Department's weekly petroleum supply report is scheduled for release today at 10:30 a.m. in Washington. U.S. crude stockpiles in the week ended March 14 probably rose 2.3 million barrels, according to the median of eight responses in a Bloomberg News survey.

Gasoline, Brent

Gasoline inventories probably fell 400,000 barrels from 236 million barrels the week before, according to the survey.

Brent crude for May settlement fell as much as $2.23, or 2.1 percent, to $103.65 a barrel on London's ICE Futures Europe exchange. It was at $103.44 at 12:38 p.m. in London.

The Fed reduced its benchmark rate by 0.75 percentage point to 2.25 percent, less than the full-point cut many traders expected.

``The fundamentals as we enter into the spring season are likely to weaken,'' said Victor Shum, senior principal at consultants Purvin & Gertz Inc. in Singapore. ``The $5 slump earlier is a reminder to the more risk-averse investors that the U.S. economy might be worse than it appears and that's bound to have an impact on oil demand.''

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

Last Updated: March 19, 2008 08:44 EDT