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Oil Falls a Third Day as Stockpile Gain Signals Slowing Economy

Aug. 12 (Bloomberg) -- Oil fell for a third day in New York as U.S. fuel stockpiles rose more than forecast, adding to signs of slowing economic growth in the world’s biggest crude consumer.

Oil has slumped 5 percent in the past three days after the Energy Department said gasoline supplies climbed, reaching the highest level for the weekly reporting period in at least 10 years. Distillate stockpiles increased to the highest since January 1983. The U.S.’s June trade deficit unexpectedly widened and China’s industrial output grew by the least in 11 months.

“The U.S. inventory report was bearish, showing that there wasn’t much of a summer driving season again,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “Global economic concerns are becoming the top of mind issue so we’ve seen equities pull back. China is showing signs of weakness in growth.”

Crude for September delivery dropped as much as 90 cents, or 1.2 percent, to $77.12 a barrel in electronic trading on the New York Mercantile Exchange. It was at $77.70 at 3:05 p.m. Singapore time. Yesterday, the contract fell $2.23, or 2.8 percent, to $78.02, the lowest settlement since July 28.

U.S. gasoline supplies rose 409,000 barrels to 223.4 million last week, the seventh straight gain, according to the Energy Department. Stockpiles were forecast to increase 250,000 barrels, according to the Bloomberg News survey.

“The big thing for the crude market was the rise in U.S. gasoline stocks,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “We also had some weaker macro data in the form of the U.S. trade numbers.”

Inventories of distillate fuel, a category that includes heating oil and diesel, climbed 3.46 million barrels to 173.1 million. Analysts projected a 1.75 million-barrel increase.

Trade Deficit

The U.S. trade deficit unexpectedly widened in June to $49.9 billion, Commerce Department figures showed yesterday, the highest level since October 2008, as consumer goods imports rose to a record and exports declined.

China’s year-on-year industrial production growth slowed to 13.4 percent in July, the statistics bureau said in Beijing yesterday. In June, the increase was 13.7 percent. July’s rate was the smallest since August last year after excluding distortions caused by holidays at the start of each year.

Federal Reserve policy makers announced steps on Aug. 10 to bolster an economy that it said is starting to weaken. The Fed’s Open Market Committee said in a statement that “the pace of economic recovery is likely to be more modest in the near term than had been anticipated.”

The Standard & Poor’s 500 Index fell 2.8 percent, the most since July 16, in New York yesterday. The Dow Jones Industrial Average lost 2.5 percent to 10,378.83.

Global Growth

“A wave of selling hit Wall Street last night as concerns about global growth came to the fore again,” said David Taylor, a market analyst at CMC Markets Ltd. in Sydney.

Asian stocks fell, extending the global rout in equities, as concern spread that the U.S. Federal Reserve’s plans this week to boost economic growth indicate a recovery is in jeopardy. The MSCI Asia Pacific Index dropped 1.3 percent to 117.40 as of 3:43 p.m. in Tokyo. The gauge has dropped 2.7 percent this year.

U.S. refineries operated at 88.1 percent of capacity, down 3.1 percentage points from the prior week, the Energy Department report showed. Crude supplies declined 2.99 million barrels to 355 million. Analysts forecast a 2 million-barrel drop.

“Given the weak demand crude runs need to correct lower,” said Purvin & Gertz’s Shum. “Runs had soared to levels that we saw back in 2006 and 2007 so they had to come off.”

Brent crude for September settlement dropped as much as $1.02, or 1.3 percent, to $76.62 a barrel on the London-based ICE Futures Europe Exchange. It was at $77.14 at 3:05 p.m. Singapore time. Yesterday, the contract tumbled $1.96, or 2.5 percent, to $77.64.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net.

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