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Crude Drops From Six-Week High on Concern Recovery May Falter

Oil fell from the highest in six weeks as investors speculated gains were exaggerated amid concern that Europe’s debt crisis and the faltering U.S. economic recovery will temper fuel demand.

Futures dropped as much as 1.9 percent after technical indicators signaled gains of more than 3 percent in the past two days may have been excessive. U.S. Treasury Secretary Timothy F. Geithner will meet European finance ministers this week to discuss efforts to contain the region’s sovereign-debt troubles. The International Energy Agency yesterday cut its global oil-consumption forecasts for this year and 2012.

“There is overall reduced demand as a consequence of weaker than expected economic growth in the developed economies,” Ric Spooner, a chief market analyst at CMC Markets in Sydney, said by telephone. “Growth in the big Western economies is weaker than it was a few months ago and getting weaker all the time.”

Crude for October delivery declined as much as $1.68 to $88.53 a barrel in electronic trading on the New York Mercantile Exchange. It was at $88.81 at 2:47 p.m. Singapore time. The contract yesterday rose $2.02 to $90.21, the highest since Aug. 3. Futures have lost 2.9 percent so far this year.

Brent oil for October settlement on the London-based ICE Futures Europe exchange fell as much as 79 cents, or 0.7 percent, to $111.10 a barrel. The European benchmark contract was at a premium of $22.53 to U.S. futures, down from a record close of $26.66 on Sept. 6.

Technical Indicators

New York oil’s five-day stochastic oscillators climbed above 80, signaling prices have increased too quickly, according to data compiled by Bloomberg. Futures also stopped advancing yesterday before the 50-day moving average, at $90.70 a barrel today. A failure to breach technical resistance typically means prices will change direction.

The Paris-based IEA reduced its estimate for oil demand this year by 200,000 barrels a day and by 400,000 in 2012. Worldwide consumption will rise 1.2 percent to 89.3 million barrels a day this year and 1.6 percent to 90.7 million in 2012. A full resumption of exports from Libya following the ouster of Muammar Qaddafi will be “long and difficult,” said the energy-security adviser to developed nations.

Geithner will meet European Union finance ministers in Wroclaw, Poland, on Sept. 16 and Sept. 17. It will be the first time he attends a session of Europe’s Economic and Financial Affairs Council, known as Ecofin.

U.S. Economy

“The market will focus on developments in the euro zone, ongoing weakness in economic data, and the restart of production in Libya,” Tom Pawlicki, a Chicago-based analyst at MF Global Holdings Ltd., said in a note.

U.S. retail sales probably climbed 0.2 percent in August, the slowest pace in three months, as job and income growth weakened, according to the median estimate of 73 economists surveyed by Bloomberg News before a Commerce Department report today. The country is the world’s largest economy and oil user.

Gasoline inventories rose 2.76 million barrels in the week ended Sept. 9, the industry-funded American Petroleum Institute said yesterday. A median decline of 500,000 barrels is forecast by 14 analysts in a Bloomberg News poll before an Energy Department report today.

Crude stockpiles fell 5.05 million barrels, the API said. The Energy Department report may show supplies dropped 3 million barrels after Tropical Storm Lee shut output in the Gulf of Mexico, based on the Bloomberg News survey.

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