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Oil Drops From 26-Month High as Traders Sell to Secure Profits

Oil declined from the highest in 26 months in New York as traders sold contracts to secure profits after priced surged 6.5 percent last week.

Futures dropped as much as 0.7 percent, the first decline in five days, on concern European officials may fail to agree on ways to contain a regional debt crisis that poses a threat to growth. Hungary’s sovereign credit rating was reduced by Moody’s Investors Service yesterday. U.S. oil supplies probably fell for the first time in three weeks on increased demand from refiners, a Bloomberg News survey showed.

“Oil is taking a breather given that we’re at pretty high levels after putting on about 6 percent last week,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “It could be a bit of profit-taking. There wasn’t a lot of data overnight, although Moody’s has downgraded Hungary.”

The contract for January delivery fell as much as 58 cents to $88.80 a barrel in electronic trading on the New York Mercantile Exchange. It was at $89.18 at 2:56 p.m. Singapore time. Yesterday, prices rose to $89.38, the highest settlement since Oct. 7, 2008.

Oil climbed yesterday amid speculation the U.S. may extend stimulus measures and on cold-weather forecasts for the U.S. and Europe. That pushed prices 6.3 percent higher since Nov. 30, the biggest four-day rally since Aug. 3.

Brent crude for January settlement lost as much as 54 cents, or 0.6 percent, to $90.91 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it gained 3 cents to $91.45.

U.S. Supplies

Oil failed to breach long-term chart resistance at $89.84 a barrel, the 50 percent Fibonacci retracement of the drop to $32.40 in December 2008 from a record high of $147.27 in July that year. Futures, up 78 percent in 2009, have gained 12.5 percent this year.

Crude inventories fell 1.5 million barrels, or 0.4 percent, in the seven days ended Dec. 3 from 359.7 million a week earlier, based on the median estimate from eight analysts before an Energy Department report tomorrow.

Gasoline supplies are expected to have risen 875,000 barrels, or 0.4 percent, from 210.2 million, the survey showed. It would be the third weekly gain, the longest sequence of increases since August. Stockpiles of distillate fuel, a category that includes heating oil and diesel, probably decreased 550,000 barrels, or 0.3 percent, from 158.1 million.

The department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.

Gasoline Falls

Gasoline futures fell for a third day as Irving Oil Corp. and Valero Energy Corp. returned refinery units to service, ramping up production of the fuel.

Gasoline for January delivery dropped as much as 1.17 cents, or 0.5 percent, to $2.33 a gallon in New York. Yesterday, the contract fell 1.04 cents, or 0.4 percent, to settle at $2.3417.

Irving completed maintenance on a residual fluid catalytic cracker at its Saint John refinery in New Brunswick, Lesley Dickson, a company spokeswoman, said yesterday in an e-mail. The plant exports about 175,000 barrels a day of products to the northeastern U.S., including New York Harbor, the delivery point for Nymex gasoline and heating oil contracts.

Valero started a fluid catalytic cracker at its Memphis, Tennessee, refinery over the weekend, according to company spokesman Bill Day.

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