Oil may fall as US demand drops

Crude oil futures may fall from a seven-month high on speculation US stockpiles will increase as consumption tumbles.

Twenty-three of 34 analysts surveyed by Bloomberg News, or 68 per cent, said futures would fall through by June 12. It’s the most bearish response since February 2008. Seven respondents, or 21 per cent, forecast that oil prices would rise and four said the market would be little changed. Last week, 50 per cent of analysts said prices would decline.

Crude oil supplies climbed 2.9 million barrels to 366 million last week, according to an Energy Department report on June 3. The gain occurred as imports jumped 9.9 per cent and refineries increased operating rates to the highest in six months. Fuel demand fell by 900,000 barrels to 17.7 million barrels a day last week, the lowest since May 1999.

Prices jumped 53 per cent this year as the stock market rebounded and the dollar weakened. A falling US currency bolsters the appeal of commodities as an alternative investment.

“I really think you are going to see a reconsideration of this move higher,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “It’s probably not wise to load up on futures at these price levels given the supply and demand picture. The flow of buying may soon be exhausted.”

Crude oil for July delivery rose $2.13, or 3.2 per cent, to $68.44 a barrel this week on the New York Mercantile Exchange. Futures touched $70.32 on Friday, the highest since November 4. Prices have dropped 54 per cent from the record $147.27 a barrel reached on July 11.