Oil Declines to Its Lowest in Two Weeks as Fuel Demand Slackens

Oil declined to its lowest in two weeks on signs that snowstorms in the U.S. curbed gasoline consumption in the world’s biggest crude consumer.

Crude pared some of its losses after data showed U.S. companies added more jobs than forecast in December. Gasoline demand plunged 13 percent to the lowest level in five years last week, according to MasterCard Inc. Stockpiles of the fuel rose 5.6 million barrels, the most in a year, the American Petroleum Institute said yesterday. A government report today will also show a supply gain, according to a Bloomberg News survey.

“Today and yesterday the market has become more concerned about the fundamental situation in oil,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “The MasterCard report shows gasoline demand falling, while we still have ample inventories.”

Crude for February delivery slid as much as $1.28 to $88.10 a barrel in electronic trading on the New York Mercantile Exchange. That’s the lowest since Dec. 20. It was at $88.85 at 1:37 p.m. London time. Yesterday, the contract fell 2.4 percent, the biggest drop in seven weeks. Brent crude for February settlement fell as much as $1.16, or 1.2 percent, to $92.37 a barrel on the London-based ICE Futures Europe exchange.

Futures fell as the Dollar Index advanced to a one-week high, damping the investment appeal of commodities. Oil traded at $92.58 a barrel on Jan. 3, the highest since October 2008, and has settled above $91 in six of the last eight days.

Investors are selling futures to profit from those gains, according to Ken Hasegawa, a Tokyo-based commodity derivatives sales manager at Newedge, a brokerage. Yesterday, Brent dropped 1.4 percent, the most since Nov. 30, to $93.53.

‘Light Correction’

“There’s a light correction from profit-taking,” said Hasegawa. “The big increase in gasoline stocks was partly because of heavy snow last week.”

The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against the currencies of six U.S. trading partners, climbed for a third day, adding 0.7 percent to 80.02. A rising dollar tends to curb speculative demand for raw materials.

MasterCard Inc., the second-biggest payments network company, said in its SpendingPulse report that motorists bought an average 8.41 million barrels of gasoline a day in the week ended Dec. 31, down from 9.61 million the previous week.

U.S. inventories of the motor fuel are expected to have increased 500,000 barrels in the last week of 2010, based on the median estimate of 17 analysts surveyed by Bloomberg News. Supplies were previously at 214.9 million, 3.8 percent above the five-year average, according to the Energy Department.

Crude Inventories

U.S. crude inventories probably declined 2 million barrels last week, the Bloomberg News survey showed. Supplies were previously at 339.4 million, 7.2 percent above the five-year average. Yesterday, the American Petroleum Institute posted a 7.5 million-barrel decrease, the most since September 2008.

“Although we saw a sharp drop in crude oil stocks, the level is still high in comparison with historical data,” said Hasegawa at Newedge. “There’s no concern.”

Distillate fuel supplies, including heating oil and diesel, rose 750,000 barrels from 161 million, according to the survey. The American Petroleum Institute yesterday said inventories climbed 2.2 million.

To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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