Aug. 6 (Bloomberg) -- Crude oil was little changed as equities declined and the dollar strengthened, undermining the need to use commodities as an alternative investment.

Oil dropped as much as 2.5 percent after a disappointing forecast at Cisco Systems Inc. and lower-than-estimated earnings at MetroPCS Communications Inc. depressed stocks. U.S. crude-oil stockpiles climbed 1.67 million barrels to 349.5 million last week, an Energy Department report showed yesterday.

“There are plenty of reasons to be bearish in this market,” said Peter Beutel, president of trading advisory firm Cameron Hanover Inc. in New Canaan, Connecticut. A stronger dollar and a weaker equities market is “the combination we need to take a good look at fundamentals,” he said.

Crude oil for September delivery fell 3 cents to settle at $71.94 a barrel on the New York Mercantile Exchange. Futures yesterday closed at a seven-week high. Prices have gained 61 percent this year. Oil dropped as low as $70.18 a barrel and increased as high as $72.42.

Prices also declined as the dollar strengthened against the euro, undermining the need to use commodities as an inflation hedge. The U.S. currency rose to $1.4345 versus the euro, from $1.4404 yesterday.

The Standard & Poor’s 500 Index, which retreated from a nine-month high yesterday, slipped 0.8 percent to 994.63 at 2:38 p.m. in New York. The Dow Jones Industrial Average fell 57.66 points, or 0.6 percent, to 9,223.31.

OPEC Shipments

The Organization of Petroleum Exporting Countries will increase crude shipments for the first time since June, according to consultant Oil Movements. OPEC will raise deliveries by 0.4 percent in the four weeks ending Aug. 22, the tanker tracker said today, as higher prices encourage members to exceed production quotas.

The gain suggests that U.S. crude stocks will increase again this week, said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York.

“We still have a huge oversupply, it’s hard to feel like the market should be tightening up,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “We have a heating oil market that has been trying to trend higher despite inventories that are 21 percent higher than a year ago.”

U.S. supplies of distillate fuel, a category that includes heating oil and diesel, fell by 1.14 million barrels to 161.5 million, the Energy Department said. Inventories were projected to increase 1.23 million barrels, according to the median of 16 responses by analysts in a Bloomberg News survey.

Overdone

“There’s a feeling that the big jumps of recent days have been overdone,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “The DOE report yesterday was relatively bearish. There was a big build in crude supplies and the drop in gasoline was smaller than expected.”

Gasoline inventories declined 218,000 barrels to 212.9 million last week, the report showed. An 800,000-barrel drop was forecast, the survey showed.

Brent crude oil for September settlement fell 68 cents, or 0.9 percent, to $74.83 a barrel on London’s ICE Futures Europe Exchange.

OPEC may decide to maintain current crude output levels when it meets next month in Vienna, Kuwait’s oil minister was cited as saying by state-run KUNA news agency.

Sheikh Ahmed Abdullah al-Sabah ruled out the possibility of the producer group cutting production further, KUNA said. The current oil price is suitable for Kuwait, he said.

Jobless Claims

Crude pared earlier losses after a report showed the number of Americans filing claims for jobless benefits fell more than economists predicted, a sign some employers have slowed staff cuts as the recession eases.

Applications for jobless benefits dropped by 38,000 to 550,000 in the week ended Aug. 1, figures from the Labor Department showed today in Washington.

The claims were “a little bit supportive” for oil, said Tom Bentz a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. Equities and the dollar are stronger indicators of the direction of the crude oil market, he said.

Benchmark West Texas Intermediate crude has kept at a discount to its European counterpart Brent since early July. Brent is trading at a premium of about $3 to the WTI oil contract traded on Nymex.

“Cushing inventories are brimming again, that’s why we’re lagging Brent,” said Bentz, referring to WTI.

Stockpiles at Cushing, Oklahoma, the delivery point for New York futures, climbed to 33.3 million barrels last week, the highest since the week of March 13, according to the Energy Department.

‘Fact of Life’

The weakness in WTI “is likely to be a fact of life for a while until we de-bottleneck the Midwest” of stocks, said Antoine Halff, head of energy research at Newedge USA LLC in New York. “Looks like refiners are responding by reducing production,” he said.

Refinery use decreased to its lowest level in 11 weeks to 84.5 percent, about a 0.1 percentage point drop from the previous week.

Crude oil volume in electronic trading on the Nymex was 516,293 contracts as of 3:01 p.m. in New York. Volume totaled 580,549 contracts yesterday, 10 percent higher than the average over the past three months. Open interest was 1.2 million contracts yesterday. The exchange has a one-business-day delay in reporting open interest and full volume data.

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net.

Last Updated: August 6, 2009 16:02 EDT