Oil slipped from the highest close in four days in New York as a downgrade of Japan’s credit rating and forecasts of growing crude stockpiles in the U.S. fanned concern slowing economic growth will reduce demand.
Futures declined after Moody’s Investors Service cut its debt rating for Japan. Data today from the Energy Information Administration may show U.S. inventories climbed, according to a Bloomberg survey.
“If we see a draw in the EIA numbers, then that could provide some support to the oil price,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne who predicts U.S. futures will average $93 a barrel in the third quarter. “Anytime there’s a tightening in the market, people start to get excited.”
Crude for October delivery on the New York Mercantile Exchange fell as much as 55 cents to $84.89 a barrel and was at $84.96 a barrel at 8:43 a.m. London time. The contract yesterday jumped $1.02, or 1.2 percent, to $85.44, the highest close since Aug. 17.
Brent oil for October settlement lost 12 cents to $109.19 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $24.23 to U.S. futures, compared with $23.87 at settlement yesterday and a record close of $26.21 on Aug. 19.
U.S. crude supplies fell 3.34 million barrels to 347 million last week, the industry-funded American Petroleum Institute said yesterday. The Energy Department report may show stockpiles rose 1.75 million barrels from 354 million in the seven days ended Aug. 19, according to the median of 14 analyst estimates in the Bloomberg survey.
Gasoline inventories increased 6.37 million barrels to 213.9 million last week, according to API data yesterday. The government report may show they decreased 1 million barrels from 210 million, the Bloomberg News survey shows.
The API collects stockpile data on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed for its weekly survey. Oil-supply totals from the API and the department have moved in the same direction 71 percent of the time in the past year and 75 percent in the past four years.
London-traded Brent dropped as much as 3.2 percent on Aug. 22, narrowing its premium to U.S. futures by the most in five weeks, amid speculation Libyan output may recover sooner than expected after rebels entered Tripoli. They took control of Muammar Qaddafi’s compound in the city yesterday after battling loyalist forces for control of the capital for a third day.
Libyan production will resume “soon,” though it may take a year to return to pre-conflict levels of 1.5 million barrels a day, Ahmed Jehani, chairman of the rebels’ stabilization team, said yesterday. The country’s production fell to 100,000 barrels a day last month, according to a Bloomberg News survey.
“It will take a while for Libyan crude to come out,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “People should be looking for a $20 a barrel spread, at least, going into the next year.”
Oil also fluctuated amid speculation that Fed Chairman Ben S. Bernanke will announce further steps to bolster the U.S. economy. Data today may show business-equipment demand fell, two days before a report that may show the economy grew less in the second quarter than previously estimated. Bernanke and other central bankers will meet this week in Jackson Hole, Wyoming.
“The macro-economic outlook is not good,” Nunan said. “At the meeting this week, if the Fed announces a new program of quantitative easing or similar, it would mean fund money would probably come back into the market. So people are expecting that.”
Moody’s Investors Service cut Japan’s credit rating by one step, saying “weak” prospects for growth will make it difficult for the government to rein in the world’s largest public debt burden.