Oil Falls for a Fifth Day on Dollar Strength, Rising Supplies

By Rachel Graham and Grant Smith

Jan. 15 (Bloomberg) -- Crude oil fell for a fifth day, its longest losing streak in a month, as the dollar gained against the euro, curbing demand for commodities as a currency hedge.

Oil is heading for its first weekly decline in five weeks after a U.S. government report showed supplies of crude and fuels increased, leaving the nation’s stockpiles of distillates like heating oil 18 percent higher than normal. The International Energy Agency kept its forecast for 2010 global oil demand unchanged at 86.3 million barrels a day in a monthly report today.

“If the economy is improving there is an expectation oil stocks will start to fall, but it’s not happening,” said Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg. “The dollar is an extra point for today.”

Crude oil for February delivery fell as much as 82 cents, or 1 percent, to $78.57 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $78.67 at 11:31 a.m. London time. A close at that level would mean a drop of 5 percent this week.

The dollar gained the most in nearly a month against the euro as Greece’s struggles with its budget deficit dented confidence in the region. The dollar traded as high as $1.4378 against the euro.

Crude oil may fall next week on speculation that U.S. inventories will climb for a third week and as fuel demand declines, a Bloomberg News survey of 41 analysts showed.

Oil prices will drop through Jan. 22, according to 42 percent of the respondents. Thirteen respondents, or 32 percent, forecast an increase and 11 said prices will be little changed. Last week, 44 percent of analysts forecast a decline in futures.

Stockpiles Drop

Oil settled below $80 a barrel on Jan. 13, the first time this year, after the U.S. Energy Department said crude and fuel inventories increased. Distillate fuel stockpiles rose for the first week in five.

Crude oil stockpiles climbed for a second week, adding 3.7 million barrels to 331 million barrels, the Energy Department said Jan. 13. Gasoline and distillate inventories also rose.

The International Energy Agency cut its forecast for oil supplies from outside the Organization of Oil Exporting Countries this year because of lower-than-expected production in Azerbaijan.

Supplies from outside OPEC will climb by 200,000 barrels a day next near compared with 2009. Production from Azerbaijan’s Azeri-Chirag-Guneshli field was cut by a gas leak in 2008.

Brent crude for March settlement fell as much as 93 cents, or 1.2 percent, to $77.64 a barrel on the London-based ICE Futures Europe exchange. It was at $77.81 at 11:33 a.m. London time.

To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net