Oil Falls to Five-Week Low on Forecasts of Rising U.S. Supply

By Mark Shenk
April 21 (Bloomberg) – Oil fell to a five-week low in New York on speculation that a government report will show that U.S. inventories rose from their highest level since 1990.
An Energy Department report tomorrow will show that crude supplies climbed 2.5 million barrels last week, according to the median of 13 responses in a Bloomberg News survey. Oil dropped yesterday after an index of U.S. leading economic indicators showed a lower reading than expected.
“The true state of the economy is starting to filter through to the energy markets,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “This is raising concern about economic growth later this year and about a further drop in demand.”
Crude oil for May fell $1.03, or 2.2 percent, to $44.85 a barrel at 9:06 a.m. on the New York Mercantile Exchange. Prices declined as much as $1.11, or 2.4 percent, to $44.77, the lowest since March 16. Futures are up 0.6 percent this year.
The May contract expires today. The more-active June futures contract dropped 37 cents, or 0.8 percent, to $48.14 a barrel.
The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington.
The dollar traded near a five-week high versus the euro as European Central Bank policy makers disagreed on the measures needed to combat the recession, reducing the appeal of commodities as an inflation hedge.
Stock Prices
Commodities have also dropped because of falling stock prices. European stocks and U.S. futures fell today after American banks reported profits that missed analysts’ estimates.
“We were dazzled by the strength of the Dow but now that the stock market is taking a hit, attention is focused on how bad the demand picture is,” Mueller said. “It’s hard to justify higher prices when U.S. inventories are pushing records.”
Brent crude oil for June settlement declined 16 cents, or 0.3 percent, to $49.70 a barrel on London’s ICE Futures Europe exchange. The excess of U.S. supply helped push the discount of crude on the Nymex against North Sea Brent to $4.40, the widest since Feb. 18.