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Oil Drops From One-Month High Amid Speculation U.S. Supply Rose

Oil slid from the highest level in a month in New York on signs that yesterday’s gains were excessive, given speculation stockpiles rose for a third week in the U.S., the world’s largest consumer of crude.

West Texas Intermediate dropped as much as 0.8 percent after climbing 2.7 percent. Crude inventories in the U.S. probably increased by 1 million barrels last week, a Bloomberg News survey showed before an Energy Department report tomorrow. Prices surged yesterday as Israeli ground forces prepared to enter the Gaza Strip for the first time in almost four years.

“The market remains well-supplied,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt who forecasts WTI futures will rise above $90 a barrel before the end of the year, said by phone. “The bias is upwards due to supply risks and geopolitical tensions. The risk of an Israeli invasion into the Gaza strip is still there.”

Crude for January delivery fell as much as 75 cents to $88.53 a barrel in electronic trading on the New York Mercantile Exchange. It was at $88.77 at 1:10 p.m. London time. The contract surged to $89.28 yesterday, the highest close since Oct. 19. Prices have declined 10 percent this year.

Brent for January settlement on the London-based ICE Futures Europe exchange slipped as much as 95 cents, or 0.9 percent, to $110.75 a barrel. The European benchmark crude was at a premium of $22.59 to WTI, from $22.42 yesterday.

Stockpiles Climb

U.S. crude stockpiles climbed to 375.9 million barrels in the week ended Nov. 9, the Energy Department said in a report on Nov. 15. That was the highest since July 20.

Crude output rose 32,000 barrels a day to 6.71 million in the week to Nov. 9, the fastest rate since May 1994, the department’s report showed. Production was up for 10 weeks, the longest string of gains since 2008. Inventories also may have increased as Phillips 66’s 238,000 barrel-a-day Bayway refinery in New Jersey remained shut after Hurricane Sandy, which hit the East Coast on Oct. 29.

Gasoline supplies probably climbed 1 million barrels last week, according to the median estimate of seven analysts surveyed by Bloomberg News before tomorrow’s report. Distillate- fuel inventories, including heating oil and diesel, are expected to have dropped 1 million barrels.

The industry-funded American Petroleum Institute in Washington will publish its own stockpile data today.

The conflict in Gaza threatens further instability in the Middle East and North Africa after a wave of uprisings since last year, including one in Libya that almost entirely cut crude exports from the north African producer. Israeli leaders have said that all options, including a military strike, are justified in countering what they describe as an existential threat from Iran, the fifth-biggest oil producer in the Organization of Petroleum Exporting Countries.

WTI futures also retreated after reaching technical resistance along the 50-day moving average, around $89.80 a barrel today, according to data compiled by Bloomberg.

Brent may rally to almost $117 in about a fortnight after it posted a so-called bullish candle pattern yesterday, according to technical analysis by Futurestechs.com Ltd.

Prices will probably target $114 a barrel in the next two weeks and then rise to $116.88, according to Liam Roberts, technical analyst at the Billericay, England-based researcher.

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