Oil Declines on Rising U.S. Crude Inventories as OPEC Production Increases

Crude oil dropped for a third day in New York on speculation the economic recovery is not proceeding fast enough to rein in excessive fuel supplies.

The Organization of Petroleum Exporting Countries’ oil output increased for the third time in four months in July, led by gains in Iraq, a Bloomberg News survey showed. Futures yesterday declined to a one-week low after U.S. crude imports jumped to the highest level in almost four years, leading to an unexpected increase in commercially held inventories.

“There’s a fear of a slowdown in economic growth which will go on for the next few weeks,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “Investors are likely to be disappointed with the economic data and oil will come down a bit. It’s more likely to go below $70 than above $80.”

Crude for September delivery declined as much as 54 cents, or 0.7 percent, to $76.45 a barrel, in electronic trading on the New York Mercantile Exchange, and traded for $76.54 as of 1:36 p.m. London time. Yesterday, it fell to $76.99, the lowest settlement since July 21. Brent crude for September settlement on the London-based ICE Futures Europe exchange was down 45 cents at $75.61.

Futures yesterday declined to a one-week low after U.S. crude imports jumped to the highest level in almost four years, leading to an unexpected increase in commercially held inventories.

The Energy Department report showed crude supplies climbed 7.31 million barrels to 360.8 million in the week ended July 23, the biggest increase since March 19.

“A lot of the crude build is due to imports, and implied demand for products like gasoline and distillates has increased, offsetting some of the bearishness,” said Mark Keenan, chief investment officer at fund manager Cubit Asset Management Pte in Singapore.

OPEC production rose by 80,000 barrels, or 0.3 percent, to an average 29.24 million barrels a day from a revised 29.16 million in June, according to Bloomberg’s survey. Output by members with quotas gained 30,000 barrels to 26.825 million from a revised 26.795 million. The figure was 1.98 million above their target.

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

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