Crude Oil Drops Below $70 After U.S. Reports Inventory Gain

Oct. 16 (Bloomberg) — Crude oil fell below $70 a barrel to the lowest since June 2007 and gasoline tumbled after a U.S. government report showed stockpiles increased more than twice as much as forecast.

Supplies rose 5.6 million barrels to 308.2 million barrels last week, the Department of Energy said in a weekly report. Oil also fell on doubts that the bank rescue plan will bolster global economic growth and fuel use. OPEC brought forward its planned meeting from next month to Oct. 24 after the oil price drop.

“The DOE numbers just added to the downward pressure on the oil market,” said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky. “The weak economy is translating into rising inventories because nobody wants to burn the stuff.”

Crude oil for November delivery fell $4.67, or 6.3 percent, to $69.87 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil touched $68.57 a barrel, the lowest since June 27, 2007, after release of the supply report at 11 a.m. Prices are down 20 percent from a year ago.

Gasoline for November delivery declined 15.83 cents, or 8.9 percent, to $1.6239 a gallon in New York. Prices dropped as much as 18.58 cents, or 10 percent, to $1.5964, the lowest since Feb. 16, 2007.

Crude oil inventories were forecast to rise 2.6 million barrels, according to the median of analyst estimates in a Bloomberg News survey.

Gasoline Supplies

Gasoline stockpiles climbed 6.97 million barrels to 193.8 million barrels in the week ended Oct. 10, the report showed. Gasoline supplies were forecast to rise 3 million barrels, according to the Bloomberg survey.

U.S. fuel demand averaged about 18.6 million barrels a day during the past four weeks, the lowest since June 1999, according to the report. The U.S. consumes 24 percent of the world’s oil.

“When the U.S. catches a cold, the impact is felt elsewhere,” said Steve Maloney, a risk-management consultant for Stamford, Connecticut-based Towers Perrin. “Demand is already down here because of the economic slowdown and should drop elsewhere. Even the countries that recently had dramatic, double- digit growth are seeing their economies slow.”

The Organization of Petroleum Exporting Countries, the producer of 40 percent of the world’s oil, reduced its forecast for average oil demand next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day, in a report yesterday.

“Following consultations with the president of the OPEC Conference and colleague ministers, it has been decided to re- schedule the Extraordinary Meeting of the OPEC Conference,” the group said today in an e-mailed statement.

No Decision

OPEC will likely cut oil output by 1 million barrels a day at next week’s meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.

“It will be one million, or more,” he told Qatar’s al- Jazeera television channel. “Prices have fallen a lot and we need to take measures.”

U.S. industrial output fell in September by the most in almost 34 years. The 2.8 percent decrease in output at factories, mines and utilities exceeded forecasts and followed a revised 1 percent decrease in August, the Federal Reserve said today.

“Commodities have gone from a leading asset class to a follower in just two months,” said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta. “Two months ago you would look at the oil market for a signal about the direction of other markets. Today you look at equities to get an idea where oil will go.”

Credit Suisse Group and Sanford C. Bernstein & Co. slashed their oil-price forecasts for next year as tightening credit conditions and slowing economic growth eroded fuel demand.

Bernstein lowered its crude oil price forecast to $70 a barrel from $90 in 2009 and cut the 2010 estimate to $80 from $95 a barrel, according to a report today. Zurich-based Credit Suisse reduced its next-year estimate by 32 percent to $75.

Brent crude oil for November settlement declined $4.49, or 6.3 percent, to $66.31 a barrel on London’s ICE Futures Europe exchange.

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