July 19 (Bloomberg) -- Crude oil declined for a fourth day in five as concern eased that Hurricane Emily will disrupt U.S. supplies and on expectations that Mexico will resume output from its biggest fields tomorrow.

Emily weakened to Category 1 and is headed for an area on Mexico's northeast coast where there are no oil platforms. Petroleos Mexicanos, Mexico's state-owned oil monopoly, said yesterday it expects production in the Campeche Sound will resume tomorrow after a three-day shutdown of 2.95 million barrels a day, or 86 percent of the country's output.

``I believe there was an over-reaction to hurricanes when prices moved up,'' said Gregor Elze, an analyst at Bayerische Landesbank in Munich. ``It was a surprise that the hurricane season started so early, but if disruptions only last for a couple of days, the loss in production isn't high.''

Crude for August delivery fell as much as 47 cents, or 0.8 percent, to $56.85 a barrel on the New York Mercantile Exchange. It was down 38 cents at 9:23 a.m. London time. Oil has jumped 37 percent from a year ago, after reaching a record $62.10 on July 7, partly on concern that hurricanes would disrupt U.S. supplies.

Emily is the fifth storm to enter the Gulf since the hurricane season began on June 1 and the second hurricane. Gulf output is almost 5 million barrels a day, or 6 percent of the world's production, counting both Mexican and U.S. fields.

Brent crude for September settlement dropped 39 cents to $56.60 on London's International Petroleum Exchange.

Mexican Imports

The U.S., which as the world's biggest oil consumer imports about 10 million barrels a day, gets about 17 percent of the total, or 1.7 million a day, from Mexico, its second-biggest supplier.

Pemex expects operations will return to normal by July 22, according to a transcript Pemex sent of a press conference given in Ciudad del Carmen yesterday by Chief Executive Officer Luis Ramirez.

The interruption of output by Pemex, as Petroleos Mexicanos is known, means shipments to the U.S. will slow, causing crude inventories to decline as refiners use supplies for production of fuels such as gasoline and distillates, a group that includes heating oil and diesel. That decrease would show on next week's U.S. Energy Department report.

For this week's report, to be released in Washington tomorrow at 10:30 a.m., the median forecast of 9 analysts surveyed by Bloomberg shows crude inventories probably dropped by 2.9 million barrels in the week ended July 15. Supplies a week earlier were 7 percent higher than their five-year seasonal average.

Distillate Stockpiles

U.S. distillate inventories probably rose by 1.5 million barrels last week, according to the survey, while gasoline stockpiles probably dropped by 1.5 million barrels.

Oil has gained 21 percent in the past two months on concern U.S. refiners would strain to meet summer gasoline demand and store enough heating fuels for the northern hemisphere winter, when demand is expected to peak.

The Organization of Petroleum Exporting Countries, the producer of about 40 percent of the world's oil, yesterday said global oil demand will grow more slowly next year as high prices deter consumption. Demand in 2006 will rise by 1.9 percent, or about 1.5 million barrels a day, to 85.2 million barrels a day. That compares with annual growth of 1.98 percent this year, OPEC said in a monthly report.

Most crude producers, such as OPEC, are pumping near capacity to let stockpiles rise before demand peaks. Oil stockpiles in Organization for Economic Cooperation and Development nations rose to the equivalent of 54 days of demand in May, up from 53 days in April, and 2.5 days more than year-earlier levels, the International Energy Agency said last week.

About 2.5 million barrels of Mexico's daily total output of about 3.4 million is so-called heavy crude, according to Pemex. Heavy oil, which often has a higher sulfur content, is typically more difficult to refine into gasoline or diesel.

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

Last Updated: July 19, 2005 04:28 EDT