Oil Falls From Highest Close in Nine Months as U.S. Crude Stockpiles Rise

Oil dropped from a nine-month high in New York after a report showed stockpiles increased in the U.S., the world’s biggest consumer of crude.

Futures slid as much as 0.5 percent and were headed for the first decline in more than a week. U.S. inventories rose by 3.55 million (APISCRUD) barrels, the American Petroleum Institute said. A government report today may show they gained by 1.35 million barrels, according to a Bloomberg News survey of analysts. Crude’s relative strength index climbed above 70 yesterday, a sign prices may have risen too fast. The U.S. criticized the refusal of Iran, OPEC’s second-biggest crude producer, to let United Nations inspectors access a suspected nuclear base.

“Oil and gas demand in the U.S. has been muted for some time,” said David Lennox, an analyst at Fat Prophets in Sydney. The increase in New York crude “from $90 to where it sits now is probably supply-shock potential,” he said.

Crude for April delivery fell as much as 56 cents to $105.72 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.19 at 4:14 p.m. Singapore time. The contract rose yesterday to $106.28, the highest close since May 4. Oil is up 2.9 percent this week on speculation that tensions with Iran over its nuclear program will threaten supplies. Prices are 8.3 percent higher in the past year.

Brent oil for April settlement was at $122.95 a barrel, up 5 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $16.76. It reached a record of $27.88 on Oct. 14.

Fuel Stockpiles

Gasoline supplies rose 314,000 barrels last week, figures from the industry-funded API showed. They are projected to increase 250,000 barrels in the Energy Department report, according to the median of 10 analyst estimates in the survey. Distillate inventories, a category that includes diesel and heating oil, gained 630,000 barrels compared with a forecast for a 1.5 million barrel decline.

The survey also estimated that refineries operated at 83.5 percent of capacity in the seven days ended Feb. 17, down 0.5 percentage point from the prior week’s one-month high.

The Energy Department is scheduled to release its weekly report at 11 a.m. today in Washington, a day later than usual because the government and financial markets were closed for the Presidents’ Day holiday. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines and files the reports with the government for the report.

Relative Strength

Oil’s advance in New York is stalling after the 14-day relative strength index climbed above 70 yesterday for the first time since Nov. 16, according to data compiled by Bloomberg. This indicates futures have risen too quickly and further gains aren’t sustainable. Investors tend to sell contracts when prices are considered overbought. Today’s reading is about 68.4.

Goldman Sachs Group Inc. recommended buying September crude futures on the Nymex on speculation supplies will tighten after the reversal of the Seaway pipeline in June, according to a weekly report emailed today.

The 500-mile (800-kilometer) Enterprise Products Partners LP and Enbridge Inc. pipeline will allow oil from the Midcontinent to reach the Gulf of Mexico for export. Goldman closed a buy recommendation for July Brent futures in London, it said.

Iran’s Nuclear Program

National Australia Bank Ltd. raised its oil forecasts for the first quarter of 2012, saying tension over Iran’s nuclear program has added to supply outages in South Sudan and the North Sea, according to a Feb. 20 report. West Texas Intermediate crude will average $100 a barrel in New York this quarter, up $1 from the bank’s previous forecast in January. Brent will average $113 instead of $108.

Prices advanced yesterday after officials from the International Atomic Energy Agency were denied access to an Iranian military base. The U.S. and Israel haven’t ruled out air strikes against Iran’s nuclear facilities, escalating tensions in a region that’s home to 54 percent of global oil reserves.

Iran’s refusal to allow access to sites where Western intelligence agencies have reported suspected nuclear weapons work is “another demonstration of Iran’s refusal to abide by its international obligations,” White House spokesman Jay Carney said yesterday.

Iran produced 3.5 million barrels of oil a day last month, according to analysts’ estimates compiled by Bloomberg. Saudi Arabia, the biggest member in the Organization of Petroleum Exporting Countries, had output of 9.7 million barrels a day.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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