Oil Drops a Fourth Day on Forecast U.S. Supplies Rose Last Week

By Christian Schmollinger

April 8 (Bloomberg) -- Crude oil fell for a fourth day on speculation that a government report today will show U.S. supplies increased as the recession curbed fuel demand.

The Energy Department will probably say crude stockpiles climbed 1.5 million barrels last week because of lower refinery operating rates, a Bloomberg News survey said. The industry- funded American Petroleum Institute said late yesterday supplies climbed 6.94 million barrels. The two reports have moved in the same direction 75 percent of the time in the past four years.

“The surprising API data was much bigger than expected and that’s pushed the market down,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge Group in Tokyo. “Refinery runs are still at low levels because of a decreased demand for products.”

Crude oil for May delivery fell as much as $1.05, or 2.1 percent, to $48.10 a barrel on the New York Mercantile Exchange. It was at $48.16 a barrel at 9:04 a.m. Singapore time.

Oil has risen 8.1 percent this year and is down 67 percent from a record in July. Yesterday, crude dropped $1.90, or 3.7 percent, to $49.15 a barrel, the lowest since April 1.

Oil supplies increased last week to 364.7 million barrels, the API said, the highest since 1990. The report was released at 4:30 p.m. in Washington.

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The Energy Department requires reports to be filed for its weekly survey. The department is scheduled to release its weekly report at 10:30 a.m. today in Washington.

U.S. Inventories

Crude-oil inventories climbed 2.84 million barrels to 359.4 million in the week ended March 27, the highest since July 1993, the Energy Department reported on April 1. It was the 23rd gain in 27 weeks. The increase left supplies 13 percent higher than the five-year average.

The price of oil for delivery in May is lower than for the following months, allowing buyers to profit from storing crude, a structure known as contango. The price of oil on the Nymex for delivery in June is $2.76 a barrel higher than for May, up from a $2.33 premium April 6.

Gasoline stockpiles probably dropped 1.4 million barrels from 216.8 million the prior week, according to the survey of analysts. Distillate fuels, a category that includes heating oil and diesel, probably fell 600,000 barrels from 144.2 million.

Refineries probably operated at 81.7 percent of capacity, unchanged from the week before and down from 82.7 percent from a month earlier, according to the median of responses in the survey.

Brent crude oil for May settlement fell as much as 75 cents, or 1.5 percent, to $50.47 a barrel on London’s ICE Futures Europe exchange. It was at $50.50 a barrel at 8:34 a.m. Singapore time. The contract dropped $1.02, or 2 percent, to end the session at $51.22 a barrel yesterday.

May Brent futures are $2.31 a barrel higher than Nymex oil for the same month, the biggest premium for the front-month contract since Feb. 24. Brent oil is often priced at a discount to Nymex crude and traded lower for most of March.

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