Oil Falls From Highest in a Week Before Unemployment Report

Crude oil fell from its highest in a week before a report forecast to show the U.S. shed more jobs, spurring concern that a recovery in fuel demand will be delayed.
The Labor Department is likely to say later today that 553,000 people made initial claims for unemployment benefits in the week ended July 11, according to a survey. U.S. gasoline and heating oil supplies increased last week, the government said yesterday. Prices will fall to $20 a barrel this year, former government adviser Philip Verleger predicted.
“The OECD economies are still deep in recession,” said Andy Sommer, an analyst at Elektrizitaets-Gesellschaft Laufenburg in Dietikon, Switzerland. “The Asian countries are coming out of the worst, but warning voices persist that growth is not stable yet.”
Crude oil for August delivery fell as much as 79 cents, or 1.3 percent, to $60.75 a barrel on the New York Mercantile Exchange, trading for $60.96 at 12:14 p.m. in London. Prices have increased 37 percent this year and jumped 3.4 percent yesterday to $61.54, the highest close since July 7.
China’s gross domestic product grew 7.9 percent in the second quarter. The nation overtook Japan as the world’s second- largest stock market by value for the first time in 18 months, as government spending and record bank lending boosted share prices. China’s industrial production increased 10.7 percent in June from a year earlier, the largest gain in nine months excluding seasonal distortions. Retail sales climbed 15 percent.
Lower Refinery Runs
“The economic situation is not getting better,” said Verleger, a professor at the University of Calgary and head of consultant PKVerleger LLC, in a telephone interview yesterday. “Global refinery runs are going to be much lower in the fall. If the recession continues and it’s a warm winter, it’s going to be devastating.”
A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.
U.S. crude inventories fell 2.81 million barrels to 344.5 million last week, the Energy Department said yesterday.
“The huge rally across the board in equities helped boost crude oil,” said Mike Sander, an investment adviser with Sander Capital in Seattle. “The weekly EIA report showed a drop in crude oil inventories by 2.8 million barrels, which lent support to higher crude prices as well.”
Growing Gasoline Stockpiles
Crude stockpiles were forecast to decline 2.1 million barrels, according to analysts surveyed by Bloomberg News. Refineries operated at 87.9 percent of capacity, the highest since August.
Gasoline inventories climbed 1.44 million barrels to 214.6 million, the highest since April, the Energy Department report showed. Supplies were forecast to increase 875,000 barrels.
Supplies of distillate fuel increased 553,000 barrels to 159.3 million in the week ended July 10, the highest since January 1985, the report showed.
Brent crude for August settlement was at $62.22 a barrel, down 87 cents, on London’s ICE Futures Europe Exchange at 12:15 p.m. in London. The more-actively traded contract for September, which becomes the front month tomorrow, slipped 50 cents to $62.08.