Crude Oil Declines From Four-Day High on U.S. Supplies, Japan Downgrade - Bloomberg

Oil dropped from the highest closing price in four days in New York before a report forecast to show crude stockpiles increased in the U.S., the world’s largest user of the commodity.

Prices also slid after Moody’s Investors Service cut Japan’s debt rating on the economic outlook for the third- biggest oil user. The U.S. Energy Department report today may show crude stockpiles rose 1.75 million barrels from 354 million in the seven days ended Aug. 19, according to the median of 14 analyst estimates in the Bloomberg survey. Crude’s drop may be limited because of delays in restoring exports from Libya, according to Barclays Plc.

“After a stream of bad economic indicators, U.S. demand, especially for gasoline, is in decline,” Thorbjoern Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark, who predicts Brent will average $107 in the fourth quarter. “The Japanese downgrade is definitely bearish news as spending has to be reduced to stop further downgrades.”

Crude for October delivery was at $85.16 a barrel, down 18 cents, at 12:59 p.m. London time in electronic trading on the New York Mercantile Exchange. It earlier rose as much as 0.5 percent. The contract yesterday jumped $1.02, or 1.2 percent, to $85.44, the highest close since Aug. 17. Front-month futures have risen 19 percent in the past year.

Brent oil for October settlement lost 12 cents to $109.19 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $23.93 to U.S. futures, compared with $23.87 at settlement yesterday and a record close of $26.21 on Aug. 19.

Moody’s Investors Service cut Japan’s credit rating by one step, saying “weak” prospects for growth will make it difficult for the government to rein in the world’s largest public debt burden.

In Libya, rebels seized control of Muammar Qaddafi’s compound in Tripoli yesterday after battling loyalist forces for control of the capital for a third day.

Oil production may take a year to reach the previous total of 1.5 million barrels a day, Ahmed Jehani, chairman of the rebels’ stabilization team, told reporters yesterday in Dubai. The country’s production fell to 100,000 barrels a day last month, according to a Bloomberg News survey.

“It will take a while for Libyan crude to come out,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo.

U.S. gasoline inventories increased 6.37 million barrels to 213.9 million last week, the industry-funded American Petroleum Institute said yesterday. An earlier Bloomberg News survey of analysts indicated that today’s government report may show they fell 1 million barrels from 210 million. September gasoline futures were down 0.89 percent on Nymex.

Crude supplies fell 3.34 million barrels to 347 million last week, according to the API’s figures.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.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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