Oil Falls a Ninth Day on Speculation Demand Recovery Is Slowing

By Ann Koh and Christian Schmollinger

Dec. 14 (Bloomberg) -- Crude oil fell for a ninth day, poised for the longest decline since July 2001, on speculation the global economy’s uneven recovery from recession may slow growth in demand for fuel and energy.

Prices declined after the Tankan business confidence index in Japan, the world’s third-largest oil consumer, posted its smallest improvement this year. Crude has dropped 15 percent since reaching a year-to-date high on Oct. 21. Goldman Sachs Group Inc. said in a report today that prices have fallen because of “slow recovery” in demand in developed markets.

“The next big support level is $65 and if we were trading on fundamentals, oil would be below $60,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The reality is that the worst of the financial crisis is behind us, but that doesn’t mean we’re out of the woods.”

Crude oil for January delivery dropped as much as $1.28, or 1.8 percent, to $68.59 a barrel in electronic trading on the New York Mercantile Exchange. It was at $69.60 at 9:03 a.m. in London. Oil recovered some of its losses after Abu Dhabi pledged $10 billion in aid to the Dubai government, spurring investors to buy higher-yielding assets.

Futures fell 1 percent to $69.87 a barrel on Dec. 11, the lowest settlement since Oct. 7. Prices dropped 7.4 percent last week, the biggest decline since September, as U.S. fuel stockpiles rose and the dollar climbed to a two-month high against the euro, reducing the investment appeal of commodities.

Fuel deliveries in the U.S., the world’s biggest oil user, averaged 18.5 million barrels a day in the four weeks ended Dec. 4, 3 percent less than a year earlier, the Energy Department reported last week.

‘Face Reality’

“Now the traders have to start to face reality and that means they have to take a look at the weak fundamentals,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo. “The levels of crude and product inventories are quite high and we’re seeing smaller imports.”

Gasoline stockpiles rose for a third week to 216.3 million barrels, the highest since April. Distillate inventories, including heating oil and diesel, climbed to 167.3 million, 25 percent above the five-year average for the period.

Brent crude oil for January settlement was at $72.02 a barrel, up 14 cents, at 9:02 a.m. in Singapore.

Hedge-fund managers and other large speculators reduced their bets on rising oil prices to a two-month low last week, according to U.S. Commodity Futures Trading Commission data.

Speculative net-long positions, the difference between orders to buy and sell the commodity, fell 11 percent to 67,817 contracts in the week ended Dec. 8, the commission said in its weekly report.

To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net