Oil Falls a Second Day as U.S. Supply Gain Counters Fuel Demand

Oil declined a second day in New York as rising U.S. crude inventories countered data showing gasoline demand increased last week in the world’s largest oil consumer.

Futures fell as much as 1.2 percent after dropping 0.6 percent yesterday. Crude stockpiles probably rose last week as imports rebounded, according to a Bloomberg News survey before an Energy Department report today. U.S. gasoline demand grew for a second week, MasterCard Inc. data showed yesterday. The European Union embargo on Iranian oil supplies will “bear bitter fruit,” Iran’s Foreign Affairs Ministry said this week.

“Downward pressure on crude futures could we remain until the end of the week,” said Andrey Kryuchenkov, an analyst at VTB Capital in London, who predicts prices will struggle to rise above $102 a barrel. “Demand numbers could well see extra attention” in today’s Energy Department data.

Crude for March delivery fell as much as $1.15 to $98.10 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.09 at 1:02 p.m. London time. Yesterday, the contract fell 63 cents to $98.95, the lowest settlement since Jan. 20. Prices have climbed 14 percent in the past year.

Brent oil for March settlement on the London-based ICE Futures Europe exchange was at $109.53 a barrel, down 50 cents. The European benchmark contract was at premium of $11.44 to the New York-traded West Texas Intermediate grade. The spread was a record $27.88 on Oct. 14.

Fuel Demand

U.S. crude stockpiles probably increased 1.45 million barrels in the week ended Jan. 20, according to the median estimate of 12 analysts surveyed by Bloomberg News. Supplies surged 7.33 million barrels, the most in four weeks, based on a report yesterday from the industry-funded American Petroleum Institute.

Gasoline inventories are expected to have climbed 2 million barrels, the survey showed. The API reported a decline of 573,000 barrels. The Energy Department is scheduled to release its weekly report at 10:30 a.m. today in Washington.

U.S. gasoline consumption increased 1.3 percent in the seven days to Jan. 20, MasterCard’s SpendingPulse report showed. Drivers bought 8.48 million barrels a day of the motor fuel, up from 8.37 million the prior week.

“We’re holding a reasonable level based on an outlook for some, but low, demand growth and against a background of potentially relatively tight supply,” said Ric Spooner, chief analyst at CMC Markets in Sydney. “Overall, the tone of the oil market is broadly firm.”

Oil’s advance in New York may stall as futures remain in a downward-sloping trend channel that started this year, according to data compiled by Bloomberg. The channel has resistance around $101.06 a barrel today. Investors tend to sell contracts when prices approach technical-resistance levels.

Iran Embargo

Iran has threatened to close the Strait of Hormuz in retaliation against the embargo on its oil exports. The ban is part of efforts by the EU and the U.S. to pressure the Persian Gulf state over a nuclear program, which Western nations say is aimed at producing weapons.

About 20 percent of the world’s oil flows through the waterway, according to the U.S. Energy Department.

The embargo is “aggressive” and will have “negative consequences” in Europe, including higher oil prices, the country’s government said in statements this week. Iran is the second-largest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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

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