Crude Oil Falls From a Seven-Week High on Fuel Demand, Dollar

Crude oil fell from a seven-week high on speculation that prices have risen faster than a recovery in fuel demand.

Oil also declined as the dollar gained against the euro, reducing the investment appeal of commodities priced in the U.S. currency. Crude stockpiles in the U.S., the world’s biggest energy consumer, probably increased for a second week, according to a Bloomberg News survey.

“Even though we see some green shoots, actual demand for oil is still quite weak,” said Gideon Lo, an analyst at DBS Vickers Hong Kong Ltd. “Crude prices at this level are not fully supported by fundamental demand and supply in the market.”

Crude oil for September delivery fell as much as $1.06, or 1.5 percent, to $70.52 a barrel on the New York Mercantile Exchange. It was at $71.10 a barrel at 2:33 p.m. Singapore time. Yesterday, futures rose $2.13, or 3.1 percent, to $71.58, the highest settlement since June 12. Prices have climbed 58 percent this year.

The dollar rose to $1.4387 per euro as of 6:45 a.m. in London from $1.4445 in New York yesterday, the weakest level since Dec. 18. The dollar gained before a European report that economists said will show producer prices fell at a record pace in June, backing the case for the region’s central bank to keep borrowing costs low.

U.S. Inventories

U.S. crude inventories probably rose 1.15 million barrels in the week ended July 31, according to the median of 12 estimates by analysts surveyed by Bloomberg News before an Energy Department report tomorrow. Nine of those surveyed said stockpiles rose and three forecast a drop. “The current data of inventory levels shows crude oil is still under some pressure to come down,” said Lo.

Fatih Birol, the International Energy Agency’s chief economist, warned that oil prices above $70 a barrel could dampen the global economic recovery, the Financial Times reported yesterday.

“I’m skeptical about that comment,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “What Saudi Arabia has been saying all along is that you need $70 oil to finance new projects, and that is a concern as we return to growth, that we have enough production capacity in the future.”

China Stimulus

Oil had traded above $71 a barrel earlier today after the U.S. Institute for Supply Management said yesterday its manufacturing index climbed to 48.9 last month from 44.8 in June and CLSA Asia-Pacific Markets said its index of China’s manufacturing rose to a one-year high. China accounts for about 45 percent of Asia’s oil use.

The Standard & Poor’s 500 Index climbed above 1,000 for the first time since November, prompting speculation raw-material demand and prices will increase. The index added 1.5 percent to 1,002.63 in New York, the highest level since President Barack Obama was elected on Nov. 4. The Dow Jones Industrial Average rallied 1.3 percent.

Gasoline supplies probably fell 1.25 million barrels from 213.1 million the week before, according to the survey.

Gasoline for September delivery traded at $2.0595 a gallon in New York, down 0.98 cent, at 2:35 p.m. in Singapore. Yesterday, it gained 5.67 cents, or 2.8 percent, to end the session at $2.0693.

Brent crude oil for September settlement dropped as much as $1.31, or 1.8 percent, to $72.24 a barrel on London’s ICE Futures Europe Exchange. It was at $73.25 a barrel at 2:42 p.m. in Singapore. link.....