Oil Heads for Biggest Monthly Drop Since May on Signal Stockpiles to Climb By Ben Sharples - Aug 30, 2011

By Ben Sharples - Aug 30, 2011

Oil declined, heading for the biggest monthly drop since May, as investors speculated that increasing crude stockpiles in the U.S. indicate fuel demand will falter in the world’s biggest consumer of the commodity.

Futures slipped as much as 0.5 percent, snapping four days of gains, after the industry-funded American Petroleum Institute said supplies rose 5.13 million barrels last week, the biggest gain since March. An Energy Department report today may say inventories fell 500,000 barrels, according to the median estimate in a Bloomberg News survey. Seven respondents forecast a drop and six expected an increase.

“Inventories continue to build, which gives us the real state of play in the market,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney. “I don’t think prices will go higher, I think we’re in a range and we’re just testing the top-side of that.”

Crude for October delivery slid as much as 45 cents to $88.45 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.49 at 12 p.m. Sydney time. The contract yesterday advanced $1.63 to $88.90. Prices are down 7.5 percent this month and 3 percent this year.

Brent oil for October settlement was at $114.05, up 3 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $25.57 to U.S. West Texas Intermediate futures, compared with a record close of $26.21 on Aug. 19. Brent is down 2.3 percent this month.
Oil Stockpiles

Crude oil stockpiles increased to 352 million, data from the American Petroleum Institute showed. Supplies are about 3.8 percent above the 5-year average, according to Bloomberg data.

Gasoline inventories declined 3.11 million barrels to 210.8 million last week, according to the API. The Energy Department report may show they fell 950,000 barrels, according to the median of 14 analyst estimates in a Bloomberg News survey.

The API collects stockpile data on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed for its weekly survey. Oil-supply totals from the API and the department have moved in the same direction 71 percent of the time in the past year and 75 percent in the past four years.

Oil slid this month amid signs developed economies are weakening. U.S. consumer confidence tumbled to the lowest level since April 2009 and European confidence fell the most since December 2008 in reports for August yesterday from the Conference Board in New York and the European Commission in Brussels.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
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