Crude Oil Falls as U.S. Stockpiles Gain Amid Slumping Demand

By Christian Schmollinger

April 1 (Bloomberg) -- Oil fell below $49 a barrel, after capping its biggest monthly gain since May, on speculation that a government report today will show U.S. inventories rose from the highest level in more than 15 years as fuel demand slows.

The industry-backed American Petroleum Institute said yesterday that crude oil supplies climbed last week to the highest since July 1993. Figures from the API and the U.S. Energy Department have moved in the same direction 75 percent of the time. The Bank of Japan’s Tankan index of sentiment among manufacturers fell to a record low of minus 58.

“The API numbers will be used as a guide for what the Energy Department numbers will show so the gain there will be viewed as a negative for the oil price,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “The consumption side is still weak and that’s likely to remain the case.”

Crude oil for May delivery fell as much as $1.38, or 2.8 percent, to $48.28 a barrel in electronic trading on the New York Mercantile Exchange. It was at $48.69 a barrel at 3:04 p.m. Singapore time. It has slumped 52 percent in the past year.

Oil rose $1.25, or 2.6 percent, to $49.66 a barrel yesterday as equities gained and a weaker dollar enhanced the appeal of commodities. Crude gained 11 percent in the first quarter after tumbling 56 percent in the previous three months. Last month’s 11 percent increase was the biggest on a monthly basis since a 12 percent jump in May.

Oil Stockpiles

The Group of 20 summit will start tomorrow as world leaders attempt to reach an agreement to stabilize their economies in the midst of the global recession.

The API report showed that crude oil supplies climbed to 357.8 million barrels last week. It also said that distillate stocks, including diesel fuel and heating oil, rose 1.78 million barrels, or 1.2 percent, to 144.5 million barrels, the highest since Jan. 12, 2007.

The Energy Department is scheduled to release its weekly supply update at 10:30 a.m. today in Washington. The report is forecast to show that crude-oil stockpiles rose 3 million barrels in the week ended March 27 from 356.6 million the previous week, according to the median of analyst estimates.

Gasoline stockpiles probably dropped 1.5 million barrels from 214.6 million the prior week, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably declined 1.15 million barrels from 143.9 million.

Refineries probably operated at 82.3 percent of capacity, up 0.3 percentage point from the week before, according to the survey. It would be the first gain in four weeks. Refiners often shut units for maintenance as attention shifts away from heating oil and before gasoline use rises with warmer weather.

OPEC Steady

Crude oil supplies have increased as the Organization of Petroleum Exporting Countries agreed on March 15 to keep output quotas unchanged, saying members have to cut a further 800,000 barrels a day to comply with existing targets. OPEC is next scheduled to meet on May 28 in Vienna.

OPEC, the International Energy Agency and the U.S. Energy Department cut their 2009 forecast for oil demand this month. They expect consumption to slump by more than 1 million barrels a day this year.

The price of oil on the Nymex for delivery in June is $1.79 a barrel higher than for May, up from $1.71 premium yesterday and a $1.42 premium on March 25.

The structure in which the future month’s price is higher than the one before it, known as contango, allows buyers to profit from hoarding oil.

Brent crude oil for May settlement fell as much as $1.32, or 2.7 percent, to $47.91 a barrel on London’s ICE Futures Europe exchange. It was at $48.38 a barrel at 3:04 p.m. Singapore time.

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