July 2 (Bloomberg) -- Crude oil fell to the lowest in a week after a report showed the U.S. shed more jobs than expected last month, signaling the world’s largest energy user remains mired in recession.

U.S. employers cut 467,000 jobs in June, the Labor Department said today. U.S. fuel demand in the four weeks ended June 26 dropped 5.8 percent from a year earlier, while demand for distillate fuel including heating oil and diesel, fell 9.4 percent, according to a Department of Energy report yesterday.

“Fundamentals are still pretty bad, and what’s really weighing on the market is inventories of middle distillates,” said Johannes Benigni, chief executive officer of Vienna-based JBC Energy GmbH. “I believe in a correction to somewhere around to $50 a barrel mark.”

Crude oil for August delivery fell as much as $1.71, or 2.5 percent, to $67.60 a barrel in electronic trading on the New York Mercantile Exchange. It traded $67.65 at 1:37 p.m. London time. Prices are up 53 percent this year.

Supply from the Organization of Petroleum Exporting Countries increased for a third month in June, a Bloomberg News survey showed yesterday.

Oil output averaged 28.23 million barrels a day last month, up 55,000 from May, according to the survey of oil companies, producers and analysts. The 11 OPEC members with quotas, all except Iraq, pumped 25.86 million barrels a day, 1.015 million more than their target.

Brent crude oil for August settlement declined as much as $1.47, or 2.1 percent, to $67.32 a barrel on London’s ICE Futures Europe exchange. It was at $67.35 a barrel at 1:26 p.m. in London.

Crude Inventories

Crude oil supplies fell 3.66 million barrels to 350.2 million, the Department of Energy said yesterday. Inventories have dropped 15.8 million barrels in the past four weeks, the biggest four-week decline in a year. Stockpiles last week were 8 percent higher than the five-year average for the period, the department said.

Stockpiles of distillate fuel in the U.S. gained 2.9 million barrels to 155 million, the highest since 1987.

Gasoline stockpiles increased 2.33 million barrels to 211.2 million in the week ended June 26, the Energy Department said in a report yesterday. Inventories were forecast to rise by 2 million barrels, according to a Bloomberg News survey.

Refineries operated at 87.1 percent of capacity in the week ended June 26, down 0.6 percentage point from the previous week, according to the DOE report. Gasoline consumption averaged 9.17 million barrels a day, rising 0.9 percent on better demand in the driving season.

Employers in the U.S. cut 467,000 jobs in June, the Labor Department reported, compared with an analyst forecast of 365,000. The jobless rate rose to 9.5 percent, the highest since August 1983, from 9.4 percent.

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

Last Updated: July 2, 2009 08:46 EDT