Oil dropped for a second day in New York as traders sold contracts to secure profits and U.S. gasoline inventories increased, signaling demand may be slow in catching up with a strengthening economy.
Futures fell as much as 0.5 percent as the Dollar Index advanced to a one-week high, damping the investment appeal of commodities. Gasoline stockpiles in the U.S., the world’s largest oil user, climbed 5.6 million barrels last week, the most in a year, the industry-funded American Petroleum Institute said yesterday. An Energy Department report today will also show a supply gain, according to a Bloomberg News survey.
“There’s a light correction from profit-taking,” said Ken Hasegawa, a Tokyo-based commodity derivatives sales manager at Newedge, a brokerage. “The big increase in gasoline stocks was partly because of heavy snow last week.”
Crude for February delivery slid as much as 74 cents to $88.64 a barrel in electronic trading on the New York Mercantile Exchange. It was at $88.81 at 8:24 a.m. London time. Yesterday, the contract fell 2.4 percent, the biggest drop in seven weeks.
Oil traded at $92.58 a barrel on Jan. 3, the highest since October 2008, and has settled above $91 in six of the last eight days. Investors are selling futures to profit from those gains, according to Hasegawa.
Brent crude for February settlement fell as much as 67 cents, or 0.7 percent, to $92.86 a barrel on the London-based ICE Futures Europe exchange. Yesterday, the contract dropped 1.4 percent, the most since Nov. 30, to $93.53.
The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against the currencies of six U.S. trading partners, climbed for a third day, adding 0.2 percent to 79.634. A rising dollar tends to curb speculative demand for raw materials.
U.S. gasoline inventories are expected to have increased 500,000 barrels in the last week of 2010, based on the median estimate of 17 analysts surveyed by Bloomberg News. Supplies were previously at 214.9 million, 3.8 percent above the five-year average, according to the Energy Department.
U.S. crude inventories probably declined 2 million barrels last week, the Bloomberg News survey showed. Supplies were previously at 339.4 million, 7.2 percent above the five-year average. Yesterday, the American Petroleum Institute posted a 7.5 million-barrel decrease, the most since September 2008.
“Although we saw a sharp drop in crude oil stocks, the level is still high in comparison with historical data,” said Hasegawa at Newedge. “There’s no concern.”
Distillate fuel supplies, including heating oil and diesel, rose 750,000 barrels from 161 million, according to the survey. The American Petroleum Institute yesterday said inventories climbed 2.2 million.