Oil Near Three-Month High in New York Amid Supply Risks

Oil dropped from its highest close in three days in London as concern that demand will weaken countered signs of shrinking supply in the U.S., the world’s biggest crude consumer.

Brent dropped as much as 1 percent after Japan’s trade deficit widened more than expected as Europe’s debt crisis and a slowdown in China dragged down exports. An Energy Department report today may show U.S. crude supplies slid by 250,000 barrels, according to a Bloomberg News survey. United Nations nuclear inspectors and Iran agreed to meet again over access to disputed documents, people and sites allegedly linked to the Persian Gulf country’s nuclear program.

“Oil is going to be caught in a tug-of-war range until the issues of geopolitical turbulence or economic slump are resolved,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “Ultimately, bullish factors such as tension over Iran, instability in the wider Middle East and good economic growth in emerging markets will win out, but for now the market will be range-bound.”

Brent oil for October settlement on the London-based ICE Futures Europe exchange was at $113.93 a barrel, down 71 cents, as of 1:24 p.m. local time. Yesterday, it settled at $114.64, the highest since Aug. 16. The European benchmark crude was at a $17.25 premium to New York-traded West Texas Intermediate grade, from $17.80 yesterday.

Crude for October delivery was at $96.69 a barrel in electronic trading on the New York Mercantile Exchange, down 15 cents. The September contract, which expired yesterday, rose 71 cents to $96.68, the highest close since May 10. Front-month prices are 2.2 percent lower this year.

Nuclear Inspectors

Japan’s trade shortfall was 517.4 billion yen ($6.5 billion), after a revised 60.3 billion yen surplus in June, the Finance Ministry said in Tokyo today.

International Atomic Energy Agency inspectors will meet on Aug. 24 at the Iranian embassy in Vienna, the IAEA said late yesterday in a statement. It is the first meeting since talks over a so-called structured approach to the atomic investigation broke down two months ago.

Oil’s rally in New York may stall as a technical indicator shows futures have risen too quickly for further gains to be sustained, according to data compiled by Bloomberg. The 14-day relative strength index is near 70, the highest reading since February. Crude also has chart resistance along its 200-day moving average around $96.74 a barrel today. The front-month contract yesterday traded higher than this indicator without settling above it.

Energy Department

Crude inventories dropped by 6 million barrels last week to 361 million, the industry-funded American Petroleum Institute said. U.S. gasoline inventories climbed 869,000 barrels last week, according to the API. The Energy Department report may show supplies slipped 1.4 million barrels, according to the Bloomberg survey. Distillate stockpiles, a category that includes heating oil and diesel, fell 1 million barrels in the API report compared with a forecast 1 million-barrel gain in the survey.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

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

Finance Ministers

Luxembourg Prime Minister Jean-Claude Juncker, head of the group of euro-area finance ministers, visits Athens today to listen to a request by Greece’s Prime Minister, Antonis Samaras, for a two-year extension to the country’s fiscal-adjustment program. French President Francois Hollande and German Chancellor Angela Merkel meet in Berlin tomorrow. Concessions are possible for Greece if it shows a willingness to meet the main targets in its bailout, Norbert Barthle, a senior lawmaker with Merkel’s government, said yesterday.

Tropical Storm Isaac, the ninth named storm of the Atlantic hurricane season, has top sustained winds of 45 miles (72 kilometers) an hour, is expected to move across the Leeward Islands today and into the Caribbean Sea, where it may become a hurricane tomorrow, the U.S. National Hurricane Center said.

Hurricane watches were posted for the British Virgin Islands. The system is 210 miles east of Guadeloupe and moving west at 19 mph.

To contact the reporter on this story: 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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