Crude Oil Falls for Sixth Day on Concern Stockpiles Are Rising

By Grant Smith and Christian Schmollinger

Jan. 13 (Bloomberg) -- Crude oil fell for a sixth day in New York, its longest decline in a month, on speculation that slumping demand caused U.S. crude inventories to accumulate.

U.S. crude stockpiles probably gained 2.25 million barrels in the week ended Jan. 9, according to a Bloomberg survey before an Energy Department report tomorrow. That would be the 14th gain in 16 weeks. The U.S. economy will contract 1.5 percent in 2009, a monthly poll of economists showed.

“There is limited demand for oil at the moment, so I wouldn’t be surprised to see a continuation of the trend of rising inventories,” said Toby Hassall, an analyst with Commodity Warrants Australia Ltd. in Sydney. “We’ve got a pretty strong incentive to store oil with the way the forward curve is structured at the moment.”

Crude oil for February delivery fell as much as $1.49, or 4 percent, to $36.10 a barrel in electronic trading on the New York Mercantile Exchange. The contract, down 25 percent in six days, traded for $36.52 a barrel at 9:08 a.m. London time.

Futures, down 61 percent from a year ago, declined $3.24 to $37.59 a barrel yesterday, the lowest settlement since Dec. 24. Oil for February delivery is now at a 35 percent discount to the December future, a market situation known as contango where traders fetch higher prices for contracts for later delivery.

China Imports

China, the world’s second-largest energy user after the U.S., increased crude-oil imports by 12 percent last month as the country took advantage of falling fuel purchase costs to boost stockpiles.

Imports rose to 14.37 million metric tons from a year earlier, the Beijing-based Customs General Administration of China said on its Web site today. Full-year imports increased 9.6 percent to 178.9 million tons.

Most commodities declined yesterday because of falling demand for raw materials, with corn, soybeans and wheat dropping the most allowed by the Chicago Board of Trade in a single day. The Reuters/Jefferies CRB Index of 19 commodities slid as much as 4 percent.

Brent crude oil for February settlement fell as much as $1.07, or 2.5 percent, to $41.84 a barrel on London’s ICE Futures Europe exchange. It was at $42.24 a barrel at 9:08 a.m. London time.

U.S. Inventories

U.S. crude-oil and fuel inventories probably rose last week as refineries reduced operating rates and the recession curbed consumption, a Bloomberg News survey of analysts showed.

Crude-oil stockpiles probably increased 2.25 million barrels in the week ended Jan. 9 from 325.4 million the week before, according to the median of eight analyst estimates before an Energy Department report this week.

Gasoline stockpiles probably rose 1.5 million barrels from 211.4 million, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably climbed 1.5 million barrels from 137.8 million.

Gasoline for February delivery dropped as much as 1.5 cents, or 1.4 percent, to $1.0691 a gallon in New York, and last 107.75 as of 9:06 a.m. in London.

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

The U.S. economy will contract 1.5 percent this year, a half percentage point more than projected last month, according to the median of 59 forecasts in the survey taken from Jan. 5 to Jan. 12.

“It’s very hard to get anything into place to change the course of the economy in the first half of this year,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. “We’re in the middle of something very deep here.”

OPEC Cuts

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, agreed last month to slash production quotas by 9 percent to revive prices as the global recession erodes demand. Oil has plunged more than $100 a barrel in the past six months.

Saudi Arabian Oil Co., the world’s biggest state oil company, sent notices to refiners in Asia on Jan. 9 that it would lower crude supplies to the region by about 10 percent in February. This was the third straight month that the company reduced sales.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net.