Oil Falls as U.S. Stockpiles Gain, Global Crisis Curbs Demand

By Christian Schmollinger

Oct. 9 (Bloomberg) -- Crude oil fell for a second day as U.S. crude and gasoline inventories increased more than forecast and the global economic crisis curbed demand.

Oil supplies rose 8.12 million barrels to 302.6 million barrels in the week ended Oct. 3, as imports and output resumed after halting last month for hurricanes, the Energy Department said yesterday. The agency on Oct. 7 cut its 2008 oil demand forecast by 340,000 barrels to 86.14 million barrels a day.

``The gigantic build in inventories was due to imports resuming and some production coming back,'' said Victor Shum, senior principal at consultants Purvin & Gertz Inc. in Singapore. ``This growing sense of an extended slump in the global economy will certainly be bad news for oil demand.''

Crude oil for November delivery fell as much as $1.63, or 1.8 percent, to $87.32 a barrel in electronic trading on the New York Mercantile Exchange, and was at $87.82 a barrel at 1:55 p.m. in Singapore. Futures have fallen 40 percent from a record $147.27 a barrel on July 11.

Yesterday, oil dropped $1.11, or 1.2 percent, to settle at $88.95 a barrel after touching $86.05 a barrel, the lowest since December.

``The inventory build is evidence that what's happening is a weakening of the supply-demand equation,'' said Toby Hassall, a research analyst with Commodity Warrants Australia in Sydney. ``It's the latest in a series of fundamental developments that indicate crude prices are losing support.''

U.S. fuel demand averaged about 18.7 million barrels a day during the past four weeks, the lowest since June 1999. The figure is down 8.6 percent from the year-earlier period, the department said.

Supplies Rise

U.S. gasoline demand dropped 9.5 percent last week, the biggest decline in more than three years, as the slowing economy curtailed driving, a MasterCard Inc. report showed Oct. 7.

Gasoline for November delivery fell as much as 1.98 cents, or 1 percent, to $2.01 a gallon after declining 1.6 percent yesterday. The motor fuel is down 44 percent from a record $3.631 on July 11.

Supplies of gasoline rose 7.18 million barrels, or 4 percent, to 186.8 million barrels as refinery capacity climbed 8.7 percentage points to 80.9 percent. It was the biggest increase in refinery utilization in records that go back to 1989. Gasoline inventories had the biggest gain in seven years.

Gasoline stockpiles were expected to rise 1.5 million barrels, and refinery utilization was forecast to increase by 6 percentage points, according to the median of analyst estimates in a Bloomberg News survey. Oil inventories were estimated to rise 2.2 million barrels.

OPEC Meeting

The Organization of Petroleum Exporting Countries may meet Nov. 18 in Vienna to discuss the effect of the financial crisis on oil markets, according to Libya's top oil official, National Oil Corp. Chairman Shokri Ghanem. The next scheduled meeting of ministers is Dec. 17 in Algeria.

``They may have a meeting but in the face of a global economic deceleration I just can't imagine the Saudis will agree to a production cut,'' Purvin & Gertz's Shum said. ``Politically, it would be very unacceptable.''

Brent crude oil for November settlement declined as much as $1.46, or 1.7 percent, to $82.90 a barrel on London's ICE Futures Europe exchange. It was at $83.15 a barrel at 1:56 p.m. Singapore time. Yesterday, the contract fell 30 cents, or 0.4 percent, to $84.36 a barrel.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.