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Oil Drops From Two-Week High as Investors Seek Profit After Gain

Oil slid from the highest close in two weeks in New York as investors sought to profit from crude’s 5.8 percent advance in two days.

Futures slipped as much as 0.5 percent after climbing 0.9 percent yesterday. Prices are declining in New York as they approach technical resistance at $92.75 a barrel, according to data compiled by Bloomberg. U.S. crude stockpiles probably fell by 1.6 million barrels last week, according to a Bloomberg News survey of nine analysts before an Energy Department report tomorrow. Tropical storm Ernesto was forecast to become a hurricane as it heads for Mexico’s Bay of Campeche.

“If you come up to the topside then naturally you’re going to see people take profit,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity-markets newsletter in Sydney, who predicts West Texas Intermediate oil faces technical resistance at $92.50 a barrel.

Oil for September delivery slid as much as 42 cents to $91.78 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.91 at 2:28 p.m. Singapore time. It settled yesterday at $92.20, the highest level since July 19. Prices are 7 percent lower this year.

Brent crude for September settlement was at $109.35 a barrel, down 20 cents, on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $17.45 from $17.35 yesterday.

Fibonacci Retracement

Prices are sliding after nearing the 50-percent Fibonacci retracement of the rise to the March intraday high of $110.55 a barrel from the October 2011 low of $74.95. Crude halted an advance near the same indicator last month. Sell orders tend to be clustered near chart-resistance levels.

Tropical Storm Ernesto was forecast to strengthen on its path to the Bay of Campeche, home to most of Mexico’s crude production. The hurricane center’s tracking map shows Ernesto making landfall tomorrow on the northern coast of Belize, crossing the Yucatan into the Bay of Campeche as a tropical storm and then returning to land in southern Mexico.

Petroleos Mexicanos, Mexico’s state-owned oil company, has wells in the Bay of Campeche including the Cantarell and Ku- Maloob-Zaap production areas. Mexico was the third-largest oil exporter to the U.S. in 2011, supplying 1.1 million barrels a day, data from the U.S. Energy Department show.

Chevron Refinery

Separately, Chevron Corp. (CVX) said it contained a fire that broke out in the crude unit at its Richmond refinery, the largest in Northern California.

The company was bringing down units after a blaze at the No. 4 crude unit started yesterday around 6:15 p.m. local time, according to a person with direct knowledge of the operation who asked not to be identified because the information isn’t public.

Flames were brought under control as of 10:30 p.m. local time, and all employees at the refinery have been accounted for, said Melissa Ritchie, a Chevron spokeswoman at the plant. The plant reported an evacuation after the fire broke out, a filing with the California Emergency Management Agency shows.

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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