By Grant Smith and Alexander Kwiatkowski
Sept. 29 (Bloomberg) -- Oil fell before a report forecast to show that U.S. supplies of crude and refined oils accumulated because of a sluggish economic recovery.
An Energy Department report due tomorrow will probably show crude stockpiles rose by 1 million barrels last week, according to the median estimate of nine analysts surveyed by Bloomberg News. Gasoline and distillate fuel inventories also increased, the survey said. Oil prices have gained 50 percent this year as a weaker dollar boosts the appeal of crude as a currency hedge.
“With energy fundamentals still uninspiring, prices should remain confined to the $65-$75 trading range for some time to come,” said Edward Meir, an analyst with MF Global Ltd. in Darien, Connecticut. “The dollar’s decline seems to have stalled” and “that could remove some of the upside momentum.”
Crude oil for November delivery dropped as much as 39 cents, or 0.6 percent, to $66.45 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $66.54 at 10:45 a.m. in London. Yesterday, the contract rose 82 cents, or 1.2 percent, to settle at $66.84 a barrel.
The December contract is about 35 cents a barrel more expensive than November’s. The difference between the two front- month contracts has shrunk from more than $2 a barrel in August in tandem with rising U.S. crude stockpiles at the Cushing, Oklahoma, delivery point.
Cold Winter
The U.S. northeast, the country’s largest market for heating oil, may have the coldest winter in a decade because of a weak El Nino, a warming current in the Pacific Ocean, according to Matt Rogers, a forecaster at Commodity Weather Group, in a Bloomberg Television interview from Washington.
Refineries in the U.S. operated at 85.3 percent of capacity last week, down 0.3 percentage point from the previous week, according to the median of survey responses.
“Refineries are trying to support the market -- run rates are being decreased,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo. “Demand is very bad but with refineries limiting supply, the market will be well balanced.”
The industry-funded American Petroleum Institute will release its own inventories data in Washington today.
Brent crude oil for November settlement traded at $65.16 a barrel, down 38 cents, on the London-based ICE Futures Europe exchange at 10:45 a.m. in London. Yesterday, the contract gained 43 cents, or 0.7 percent, to settle at $65.54 a barrel.
Missile Tests
Iran, the world’s fourth-largest oil producer, yesterday carried out missile tests before a scheduled meeting with U.S. and European officials over a previously secret nuclear site.
President Barack Obama and the leaders of the U.K. and France said Sept. 25 Iran is secretly building a second plant for enriching uranium, in violation of the nuclear non- proliferation treaty.
“With the spare capacity we’ve got in the oil market at the moment, it’s obviously not going to be the same reaction we would have got 18 months ago,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney.
The permanent members of the United Nations Security Council -- the U.S., China, France, Germany, Russia and the U.K. -- will meet Iranian officials on Oct. 1 in Geneva. Iran’s Foreign Ministry denied any link between the missile tests and the Geneva talks.
-- With assistance from Yee Kai Pin in Singapore Editors: Mike Anderson, John Buckley.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.netAlexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
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