Oil falls as expected U.S. fuel-supply gain counters crude drop

NEW YORK (Bloomberg) -- Oil fell, approaching the lowest in more than a month as fuel-stockpile gains are seen offsetting an expected increase in U.S. crude supply.

Futures fell as much as 0.7% in New York. U.S. crude supplies are forecast to have decreased for a fourth week, while inventories of gasoline and distillate fuel are seen rising, according to a Bloomberg survey before a report from the Energy Information Administration on Wednesday. Prices rose earlier after data showed Russia’s oil production continued to decline in April as the country implements curbs agreed to with OPEC. Those cuts have yet to translate into lower stockpiles.

Oil has fallen the past two weeks on concerns that increasing U.S. crude production will offset efforts by the Organization of Petroleum Exporting Countries and its allies to eliminate a global supply glut. While Fereidun Fesharaki, the head of industry consultant FGE, says OPEC is certain to extend output cuts when its ministers meet later in May, industry data showed American rigs targeting crude climbed to the highest level in two years.

"Prices rose earlier because Russia production was said to have declined to near the level they promised in the OPEC accord," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. "There’s growing skepticism about the effectiveness of the OPEC deal and whether they will be able to agree to an extension."

West Texas Intermediate for June delivery slipped 20 cents to $48.64/bbl at 11:01 a.m. on the New York Mercantile Exchange. Futures fell 1% to $48.84 on Monday, the lowest settlement since March 28. Total volume traded was about 10% below the 100-day average.

Brent for July settlement slipped 12 cents to $51.40/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $2.46 premium to July WTI.

Edging lower

OPEC output fell by 40,000 bopd to 31.895 million bbl in April, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. Iraq, the second-biggest producer in the group, and Venezuela came closer to their targets. 

Among the 10 members bound by the caps, compliance strengthened to 102% from 89% in March, the survey showed. Total output -- including Libya and Nigeria -- remains 135,000 bopd above target, putting the group about 90% of the way toward its goal.

Supplies of gasoline probably rose 1 million bbl and inventories of distillate fuel, a category that includes diesel and heating oil, increased 1 million bbl last week, according to a Bloomberg survey of nine analysts. Nationwide crude stockpiles are forecast to have dropped by 3.5 million bbl in the week ended April 28.

Oil-market news. All producers will need to commit to any extension of oil output cuts beyond June, United Arab Emirates Energy Minister Suhail Al Mazrouei tells reporters in Abu Dhabi. BP Plc’s net debt rose again in the first quarter, reaching the highest level in at least a decade as payments linked to the Gulf of Mexico oil spill offset a threefold increase in net income