Oil Falls on Concern Economic Contraction May Limit Demand

By Christian Schmollinger

Jan. 21 (Bloomberg) -- Crude oil fell in New York on concern stockpiles will increase as the deepening global recession limits demand for fuels.

A U.S. Energy Department report will probably show that crude oil inventories increased for the 15th time in the past 17 weeks, a Bloomberg survey showed. Asian stocks declined for a second day, led by financial companies and metals producers, on concern of mounting bank losses. The MSCI Asia Pacific Index was down 1.6 percent.

“People’s expectations for the international economy keep shifting downward,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “Against this background of weakness in consumption my guess is that inventories should be up.”

Crude oil for March delivery fell as much as 59 cents, or 1.4 percent, to $40.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $40.41 a barrel at 3:08 p.m. Singapore time.

The February contract expired yesterday, up $2.23, or 6.1 percent, at $38.74 a barrel in the biggest gain since Dec. 31. Sales volume for the contract was less than March’s as traders avoided taking supplies at the Cushing, Oklahoma, delivery point for Nymex futures.

Brent crude oil for March settlement fell as much as 51 cents, or 1.2 percent, to $43.11 a barrel on London’s ICE Futures Europe exchange. It declined 88 cents, or 2 percent, to end the session at $43.62 a barrel.

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