Oil falls to three-month low amid projected fuel supply growth

NEW YORK (Bloomberg) -- Oil dropped to a three-month low in New York amid speculation that U.S. fuel stockpiles increased, bolstering a glut in the world’s biggest crude-consuming nation.

West Texas Intermediate oil fell 0.5%. U.S. gasoline supplies probably grew by 200,000 bbl last week, swelling stockpiles already at the highest seasonal level in at least two decades, according to a Bloomberg survey before a government report. Crude inventories, which are projected to have dropped a record 10th week, are also at the highest seasonal level in decades.

Crude has slipped more than 15% since early June after nearly doubling from a 12-year low in February as supply disruptions from Nigeria to Canada trimmed a worldwide surplus. BP Plc, the first oil major to report second-quarter results, missed analyst estimates as lower prices continued to erode income and refining margins shrank.

"Concerns about fuel inventories are weighing on the market," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Conn. "We are looking for further growth in gasoline supplies and there’s still a lot of crude in the tanks."

WTI for September delivery dropped 21 cents to settle at $42.92/bbl on the New York Mercantile Exchange. It’s the lowest close since April 25. Total volume traded was down 21% from the 100-day average at 2:49 p.m.

U.S. stockpiles

Brent for September settlement rose 15 cents to close at $44.87/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude ended the session at a $1.95 premium to WTI.

U.S. crude stockpiles were at 519.5 MMbbl in the week ended July 15, more than 100 MMbbl above the five-year average, according to data from the Energy Information Administration. Crude production increased for a second week to 8.49 MMbpd as the nation’s drillers put rigs back to work. Last June, U.S. crude output reached 9.61 MMbbl, the highest in more than 40 years.

"We’ll be keeping an eye on the U.S. crude production number," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "Production is down 1 million barrels from last year and we have to see if the increase in rigs is enough to have an impact."

Analysts project the EIA report will show that stockpiles of distillate fuel, a category that includes diesel and heating oil, climbed 900,000 bbl in the week ended July 22.