Crude Oil Falls on Expectations of Rising U.S. Gasoline Stocks

Crude oil fell a second day in New York on signs U.S. fuel stockpiles may increase as refiners increase output.

Gasoline futures dropped last week after U.S. refiners raised operating rates to a seven-week high and Exxon Mobil Corp., BP Plc and Valero Energy Corp. restarted units in Texas. Gasoline extended last week's 2.7 percent decline today on signs higher production will restore below-average U.S. inventories.

``Ultimately that is going to be a consideration'' for oil prices, said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``I don't know that that is going to happen immediately.''

Crude oil for September delivery fell as much as 44 cents, or 0.6 percent, to $75.35 a barrel, in after-hours electronic trading on the New York Mercantile Exchange. It was at $75.48 at 8:20 a.m. in Singapore.

The contract fell 28 cents to $75.79 on July 20. The August contract, which expired the same day, fell 35 cents, or 0.5 percent, to $75.57 after earlier reaching $76.13, the highest intraday price for the front-month oil contract since Aug. 10.

Gasoline demand in the U.S., the world's biggest oil user, has peaked in June or July in four of the past five years.

``The roll from the summer months to a shoulder season month is significant,'' said Tobin Gorey, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``We still think that prices are going to stay high. But that doesn't mean they're going to shift outside the usual seasonal patterns.''

Recent Gains, Brent

New York oil prices rose 18 percent the past seven weeks after unexpected declines in U.S. gasoline inventories and as oil output cuts in Africa pushed Brent futures near a record.

Brent crude oil for September settlement was at $77.35 a barrel today, down 29 cents, on the London-based ICE Futures exchange. It fell 3 cents on July 20.

Gasoline for August delivery fell 0.89 cents, or 0.4 percent, to $2.1557 a gallon in after-hours trade. It fell 1.2 percent to $2.1646 on July 20.

Oil prices have moved more than $1 a barrel in a day in recent weeks and it's not clear whether they can get to the record $78.40 a barrel reached last year, Cameron Hanover's Beutel said.

``It's going to be a very tough two weeks here or so while this market tries to decide,'' he said. ``I'm not convinced that we're done with the upside yet.''

Oil reached a record last July after Israeli troops crossed into Lebanon to attack Iranian-backed Hezbollah forces. Iran is the second-biggest oil producer in the Organization of Petroleum Exporting Countries.

OPEC, Speculators

OPEC pumps 40 percent of the world's oil and will review its current production ceiling at a meeting Sept. 11. The group last week increased its fourth-quarter demand forecast for its members' oil to 31.1 million barrels. It pumped about 30 million barrels a day in June, according to a Bloomberg survey.

Last year's record price ``was all event-risk,'' Commonwealth's Gorey said. ``This year is all supply-demand stuff. OPEC could put an extra half a million or a million barrels on the market very easily.''

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

The speculative net-long position in New York oil futures, the difference between orders to buy and sell crude, fell to 109,423 contracts on July 17, down 2.6 percent from a record the week before. Contracts to sell oil rose 0.5 percent.

Crude oil was expected to fall this week, according to a Bloomberg News survey of 33 analysts on July 19. Fourteen, or 42 percent, said oil prices would decline. Twelve, or 36 percent, said prices will increase and seven forecast little change.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net