Crude Oil Falls a Third Day as Investors Seek Recovery Evidence

By Gavin Evans and Ben Sharples

Sept. 21 (Bloomberg) -- Crude oil fell for a third day in New York on speculation further evidence of a global recovery is needed to extend the commodity’s 61 percent gain this year.

An index of leading economic indicators due today in the U.S., the world’s largest crude user, probably rose for a fifth month in August, according to economists surveyed by Bloomberg. Oil, which reached a 10-month high of $75 a barrel on Aug. 25, fell earlier as the dollar strengthened against the euro, reducing the investment appeal of commodities.

“We’ve been range-bound for a while now,” said Toby Hassall, research analyst with Commodity Warrants Australia Pty in Sydney. Investors are “now looking at the market-specific fundamentals for oil and are asking whether there is enough of a justification to break higher out of this range.”

Crude oil for October delivery fell as much as 46 cents, or 0.6 percent, to $71.58 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $71.61 at 3:40 p.m. in Sydney. Japan, India and Singapore, Asia’s major oil trading hub, are closed today for holidays.

The contract, which expires tomorrow, dropped 0.6 percent to $72.04 on Sept. 18 as a stronger dollar reduced the appeal of commodity investments priced in the U.S. currency. The more- widely held November contract fell as much as 0.8 percent to $71.94 a barrel today, and last traded at $71.97.

$65 a barrel

“The fundamentals say squarely we should be going lower,” Jonathan Barratt, managing director at Commodity Broking Services Pty, said in an interview with Bloomberg Television today. “I think it can get as low as $65 a barrel.”

New York oil futures climbed 38 percent the past six months as equity market gains increased investor confidence in the global economic prospects and the weaker dollar funneled funds into commodities. The rally stalled the past month as U.S. gasoline inventories posted two weeks of gains and distillate supplies reached their highest since January 1983.

“When you look at gasoline supplies we are at an 18-year high,” Barratt said. “Supplies of distillate and heating oil are also running very high.”

Russian oil export-growth will slow as domestic demand improves and tax breaks are lifted, OAO Rosneft, the nation’s biggest producer, said yesterday.

Brent crude oil for November settlement fell as much as 47 cents, or 0.7 percent, to $70.85 a barrel on the London-based ICE Futures Europe exchange at 3:41 p.m. in Sydney. It declined 0.3 percent to $71.32 on Sept. 18.

Oil Options

Oil traders are paying more than ever in the options market to protect against a plunge in crude prices. The gap between prices of options betting on a decline and those that would profit from a rise in oil widened to a record 10 percentage points, according to five years of data compiled by Banc of America Securities-Merrill Lynch.

U.S. refineries usually shut units for maintenance in September and October as summer gasoline demand wanes and before winter weather increases heating oil consumption. Refining runs fell in September in nine of the past 10 years and extended declines through October in four of them, according to Energy Department data.

U.S. refining rates are already 6 percentage points lower than last year, with little prospect of the hurricanes and storms in the Gulf of Mexico that sometimes disrupt production and deliveries, Commodity Warrants Australia’s Hassall said.

“There doesn’t seem to be much downside there for oil but at the same time we’re going to need a fairly big piece of news or data to really get us out of this range,” he said.

The dollar strengthened to $1.4673 per euro as of 6:26 a.m. in London from $1.4712 in New York on Sept. 18. It fell to $1.4767 on Sept. 17, the weakest level since Sept. 25, 2008.

To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net