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Oil Falls a Fifth Day on Concern Over U.S. Supply Gains, Slowing Recovery
Oil declined for a fifth day on speculation U.S. crude and fuel inventories increased last week as economic growth slows.
Oil fell to a seven-week low as the dollar strengthened against the euro, undermining investors’ need to hedge against inflation using dollar-priced assets. U.S. crude supplies probably rose last week while distillate fuel stockpiles may hit the highest level in 27 years, a Bloomberg News survey shows.
“We’ve had some bad economic signals that show a higher risk of a double-dip recession,” said Thorbjoern Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark. “The end of the driving season will mean lower demand from refiners. But $69 will likely be the bottom, as I don’t see a double-dip occurring.”
Crude for October delivery fell as much as $1.08, or 1.5 percent, to $72.02 a barrel in electronic trading on the New York Mercantile Exchange. That’s the lowest price since July 7. It was at $72.29 at 12 noon London time. Brent crude for October delivery lost 69 cents, or 0.9 percent, to $72.93 a barrel on the London-based ICE Futures Europe Exchange. The dollar rose to $1.2614 per euro after reaching $1.2603, the highest level since July 13.
Forecasts show sales of existing U.S. homes dropped 13.4 percent in July and gross domestic product growth slowed to a 1.4 percent annual pace in the second quarter, down from 2.4 percent last month.
Demand Decline
“The U.S. housing market is looking weak as well as the unemployment picture,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. “Labor Day weekend is coming in two weeks, which signals the end of the summer driving season, so consumption could take a hit in the coming month.”
Oil demand typically declines in the third quarter as the peak U.S. summer ends and refiners shut down plants for scheduled maintenance.
U.S. oil supplies probably increased 500,000 barrels last week from 354.2 million in the prior week, based on the median estimate from 13 analysts surveyed by Bloomberg News before an Energy Department report tomorrow. Gasoline inventories probably dropped 300,000 barrels.
Supplies of the distillate fuels rose 1 million barrels, or 0.6 percent, in the seven days ended Aug. 20 from 174.2 million a week earlier, according to the survey. The last time stockpiles were so high was January 1983, two months after the U.S. exited a recession.
The industry-funded American Petroleum Institute will publish its own report later today.
Brent October futures were trading at premium of 61 cents a barrel to West Texas Intermediate contracts in New York. The European grade has been above the U.S. benchmark since Aug. 17.
“The current relative strength in Brent comes against a weak set of WTI fundamentals and these weak fundamentals stand a good chance of lasting,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said in a note yesterday.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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