June 28 (Bloomberg) -- Crude oil fell from a record, trading below $60 a barrel, on speculation a 4.9 percent gain in prices during the past three days wasn't justified by rising U.S. supplies of heating oil and diesel, known as distillates.

Crude futures on the New York Mercantile Exchange are poised to drop based on charts some traders use to predict price changes, said Robert Montefusco at Sucden (U.K.) Ltd. in London. They reached $60.95 a barrel yesterday, the highest since Nymex trading began in 1983, on concern Iran's new president may limit foreign investment in the nation's oil industry, hurting output.

``U.S. stockpile figures seem to be good,'' said Montefusco, a broker at Sucden. ``There's genuine demand from the U.S. and China, but there seems to be enough crude around.''

Crude for August delivery lost as much as 73 cents, or 1.2 percent, to $59.81 a barrel in New York and was down 64 cents at 12:42 p.m. London time. It was the first drop in four days, after closing at a record $60.54 yesterday. Prices have still gained 65 percent in the past year.

``It can't close higher and higher every day,'' said Tony Machacek, a broker at Bache Financial Ltd. in London. Still, ``it's difficult to see what could topple this market. The Iranian elections and increasing demand are bullish elements.''

Brent crude for August settlement fell as much as 73 cents, or 1.2 percent, to $58.57 on London's International Petroleum Exchange, after reaching a record $59.59 yesterday.

Quota Discussions

The Organization of Petroleum Exporting Countries, the source of about 40 percent of the world's oil, is pumping almost as much crude as it can to help inventories rise in preparation for an expected surge in demand in the fourth quarter.

The group is discussing a 500,000 barrel increase in output quotas that would take their production target to 28.5 million barrels a day. OPEC President Sheikh Ahmad Fahd al-Sabah of Kuwait yesterday said a decision may be reached within one week. The organization already agreed at a meeting this month to raise quotas by 500,000 a day from July 1, to 28 million a day, a record for the 10 members with limits. Iraq is not bound by quotas.

A U.S. government report tomorrow may show inventories of distillates probably rose for a sixth straight week, adding 1.5 million barrels, according to the median forecast of 12 analysts surveyed by Bloomberg. The nation's refineries may have operated at 95.8 percent of their capacity, up 1 percentage point from a week earlier.

Distillate Demand

U.S. demand for distillates, a category of fuels that includes heating oil and diesel, jumped 6.9 percent in the four weeks ended June 17 compared with the year-earlier period, according to the U.S. Energy Department. Refineries are operating close to capacity to make enough transport and heating fuels before the fourth quarter, when world demand peaks.

After New York crude closed above $60 a barrel, ``the question is what next can or will capture this market's imagination,'' Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut-based energy consultant, said in an e-mailed note. ``There is every reason to expect a jump in this report's gasoline consumption numbers. It could set the tone for the rest of the summer.''

The U.S. Energy Department report on inventories, due at 10:30 a.m. Washington time, may also show crude stockpiles dropped 1.38 million barrels in the week ended June 24, according to the survey. That would be the fourth consecutive weekly decline.

U.S. crude stockpiles were still 7.7 percent higher than their five-year seasonal average the week ended June 17, according to the department.

Decline Predicted

Based on the relative strength index for the past nine days, which yesterday exceeded 74 for the Nymex August crude future, the contract was poised to decline, according to so-called technical traders, who use charts to predict price movements.

The relative strength index, or RSI, is a gauge that attempts to identify possible turning points in the direction of a security's price by calculating the degree daily gains outpace daily losses over a given period, or the inverse. A reading above 70 suggests prices may be poised to fall. A reading below 30 indicates a rise may be in store.

The RSI for the New York oil contract today was at 68.

Mahmoud Ahmadinejad, who won the runoff for the Iranian presidency, said two days ago he would favor domestic companies to develop the country's oil reserves, the world's second-largest.

He also plans to pursue a nuclear energy program to generate electricity. The U.S. says Iran wants to build nuclear weapons and calls the country a sponsor of terrorism. Iran has rejected the charges.

Iran, the second-biggest oil producer after Saudi Arabia in OPEC, pumped about 3.9 million barrels of crude oil a day in May, according to Bloomberg estimates. Saudi Arabia's output was 9.5 million barrels a day in the period.

Senate Vote

Speculative net-long positions, or bets by hedge-fund managers and other large speculators that crude prices will rise, increased for a third week on Nymex the week ended June 21, reaching 19,847, their highest since the end of April, according the data from the U.S. Commodity Futures Trading Commission. They reached a record high of 88,712 in early April.

The U.S. Senate today votes on legislation to overhaul the nation's energy policy with $18 billion in tax breaks and other incentives to promote more efficient energy use and encourage the development of renewable fuels.

The Senate vote will set up a confrontation with the House, which passed a version of the legislation on April 21 containing less spending and two significant measures the Senate didn't address: liability protection for makers of the gasoline additive MTBE and authorization for companies such as BP Plc to drill in part of Alaska's Arctic National Wildlife Refuge.

To contact the reporter on this story: Alejandro Barbajosa in London at abarbajosa@bloomberg.net

Last Updated: June 28, 2005 07:52 EDT