Crude Oil Falls for a Second Day on Speculation U.S. Fuel Demand Will Drop

Oil declined to a three-day low as falling equity markets reinforced doubts about the global economic recovery while the end of the U.S. summer peak consumption season signaled lower demand from refiners.

Yesterday’s U.S. Labor Day holiday marked the end of the driving season. Refiners often idle processing units for maintenance in September and October as gasoline demand drops and before heating-oil use increases. The Stoxx Europe 600 Index fell 0.7 percent and the dollar strengthened against the euro, reducing the investment appeal of commodities.

“Equities are weaker and the dollar is stronger, so for the next few days we’re likely to move in a $70-$75 range,” Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg, said from Stuttgart.

Crude for October delivery dropped as much as $1.93, or 2.6 percent, to $72.67 a barrel in electronic trading on the New York Mercantile Exchange and was at $72.93 at 1:34 p.m. London time. Yesterday’s transactions will be booked with today’s trades for settlement purposes, as there was no floor trading on Labor Day. October Brent crude fell 88 cents, or 1.1 percent, to $75.99 a barrel on the ICE Futures Europe Exchange in London.

Rising U.S. crude stockpiles are also pushing down petroleum prices, according to Barclays Capital. The New York crude market “continues to be weighed down by high U.S. onshore inventory levels,” Barclays analysts wrote in a report today. Maintenance to take place at U.S. refineries is also weakening oil prices, Barclays said.

The dollar gained for a second day against the 16-nation euro, trading at $1.2744 to the European currency, compared with $1.2876 yesterday in New York.

“The euro has been coming off badly,” Alex Lees, a commodities trader at ETX Capital, said from London. That’s pushing oil lower along with falling equities, he said.

To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net

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