Oil Falls to 11-Week Low on Outlook Gasoline Supply to Increase

Crude oil in New York tumbled to the lowest price in 11 weeks and gasoline futures dropped on forecasts U.S. supplies of the motor fuel will increase.

Futures fell 0.6 percent as a Bloomberg News survey showed gasoline stockpiles rose 1.85 million barrels last week from 240.9 million, the highest level since 1990. Crude oil supplies at Cushing, Oklahoma, the biggest U.S. trading hub, rose to the highest level since at least 2004 in the week ended Jan. 28. Gasoline and oil were also led lower by Brent crude in London.

“Gasoline inventories here are very, very robust, and demand here is still very poor,” said Kyle Cooper, director of research for IAF Advisors in Houston. Brent and WTI are “divorced” because of near-record oil stockpiles at Cushing, the delivery point for the New York contract, he said.

Oil for March delivery slipped 49 cents to settle at $84.32 a barrel on the New York Mercantile Exchange, the lowest level since Nov. 30. Futures have risen 14 percent in the past year.

Prices were little changed from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles decreased 354,000 barrels to 345.6 million. March oil fell 46 cents, or 0.5 percent, to $84.35 a barrel in electronic trading at 4:32 p.m.

Gasoline for March delivery dropped 2.86 cents, or 1.1 percent, to $2.4888 a gallon on the Nymex. Prices have increased 29 percent in the past year.

Total gasoline supplied, a measure of fuel demand, decreased 0.3 percent to 8.52 million barrels a day in the week ended Feb. 4, the lowest level since Feb. 12, 2010, according to a U.S. Energy Department report last week. Consumption has declined for six consecutive weeks.

Brent Drops

Brent crude for April settlement dropped $1.44, or 1.4 percent, to $101.64 a barrel on the ICE Futures Europe exchange in London. Yesterday it rose to $103.08, the highest settlement since September 2008, following the ouster of President Hosni Mubarak last week.

Brent’s gains have outpaced those of New York crude this year as inventories in Cushing reached 38.3 million barrels, the highest level since the Energy Department started keeping records, in the week ended Jan. 28. They fell 927,000 barrels, or 2.4 percent, to 37.4 million in the week to Feb. 4.

The supply situation has widened the difference between Brent and New York futures to $14.07 a barrel today. The spread averaged 76 cents last year.

WTI “continues to feel the pressure of increased stocks and fundamental bottlenecks in Cushing,” JPMorgan Chase & Co. analysts led by Lawrence Eagles said in a note today.

Oil for April delivery on the Nymex decreased $1.16, or 1.3 percent, to $87.57 a barrel. The March West Texas Intermediate contract in New York expires on Feb. 22.

U.S. Supplies

Overall U.S. crude inventories probably rose for a fifth week in the seven days ended Feb. 11 as TransCanada Corp. completed an extension of a pipeline to Cushing, adding to the glut at the country’s biggest oil-trading hub, a Bloomberg News survey showed. TransCanada started deliveries to Cushing on Feb. 8 in the second phase of its Keystone pipeline project.

U.S. supplies advanced 2 million barrels, or 0.6 percent, last week from 345.1 million a week earlier, according to the median estimate of 13 analysts surveyed by Bloomberg News.

The Energy Department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.

Oil also fell as the Standard & Poor’s 500 Index declined from a 32-month high after U.S. retail sales grew less than economists forecast and prices of imported goods climbed.

The S&P 500 slipped 0.4 percent to 1,327.14, and the Dow Jones Industrial Average dropped 55.25 points, or 0.5 percent, to 12,212.94 at 3:29 p.m. in New York.

U.S. Economy

U.S. retail sales increased 0.3 percent in January, the smallest gain since a drop in June, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.5 percent rise.

The Federal Reserve Bank of New York’s general economic index rose to 15.4 in February from 11.9 in January. Readings greater than zero signal expansion.

Earlier, prices surged the most in two weeks as demonstrators clashed with security forces in Bahrain, Yemen and Iran, the second-largest OPEC producer, renewing concern that supplies may be disrupted.

“People are watching with one eye the Middle East and trying to figure out how does this dovetail with economic statistics that are patchy or spotty,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “The economic data has not been as persuasive as the stock market has been.”

Oil volume in electronic trading on the Nymex was 773,985 contracts as of 3:29 p.m. in New York. Volume totaled 897,007 contracts yesterday, 23 percent above the average of the past three months. Open interest was 1.57 million contracts, the highest level since Sept. 12, 2007.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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