Energy

Oil declines from three-month high

(China Daily/Agencies)
Updated: 2010-08-05 10:52
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SINGAPORE - Crude oil declined from a three-month high in New York after equities dropped amid concern the pace of fuel demand may weaken as the United States economic recovery falters.

Oil fell for the first time in five days as Asian stock markets dropped following weaker-than-estimated US data on home sales, factory orders and consumer spending cast doubt on the strength of the economic recovery. Gasoline inventories increased 2.3 million barrels last week, the American Petroleum Institute said. A US government report is expected to show motor fuel and crude supplies fell.

"Investors are taking a bit of breather because the economic data is so weak," said Serene Lim, a commodity strategist at Australia & New Zealand Banking Group Ltd in Singapore. "Gasoline inventories are going up and it's the middle of the driving season in the US. That is slightly surprising."

Crude for September delivery dropped 53 cents, or 0.6 percent, to $82.02 a barrel in electronic trading on the New York Mercantile Exchange. It was at $82.24 at 3:05 pm Singapore time. The contract rose $1.21, or 1.5 percent, to $82.55 on Tuesday, the highest settlement since May 4. Futures have gained 3.6 percent this year.

Oil climbed on Tuesday after the euro advanced to the highest level against the US currency since May 3, making commodities more attractive as an alternative investment.

'US reality check'

US household purchases, which account for about 70 percent of the economy, were unchanged from May, according to figures from the Commerce Department. Contracts to buy existing houses unexpectedly dropped for a second month and factory bookings fell more than twice as much as economists estimated, other reports showed.

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"There is more of a reality check that the US is a bit shaky," said Peter McGuire, managing director of CWA Global Markets Pty in Sydney.

Crude inventories declined 776,000 barrels last week, the API said. Analysts surveyed by Bloomberg News before an Energy Department report said stockpiles probably fell 1.65 million barrels.

Crude supplies declined 3.6 million barrels in storage along the US Gulf Coast, according to the API. Oil inventories at Cushing Oklahoma, the delivery point for the Nymex oil contract, climbed by 666,000 to 37.896 million. Stockpiles there reached a record 37.994 million during the week of May 14.

The American Petroleum Institute collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Bloomberg News