Crude Oil Falls on Expectations U.S. Gasoline Supply Will Grow

Crude oil fell from near a nine-month high amid expectations U.S. gasoline stockpiles will rise.

A U.S. Energy Department report today will probably show the country's gasoline supplies grew last week for the seventh straight week, according to analysts surveyed by Bloomberg News. Crude rose 5.7 percent over the past five sessions before a general strike began today in Nigeria, Africa's biggest oil producer.

Oil ``prices are still quite over-extended and prone to a modest setback, which could be possibly triggered by today's'' Energy Department report, Edward Meir, an analyst at Man Financial Ltd. in Darien, Connecticut, wrote in a report. Oil is propped up ``by the uncertainty surrounding the Nigerian general strike.''

Crude oil for July delivery fell as much as 45 cents, or 0.7 percent, to $68.65 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract, which expires today, was trading for $68.80 at 1:11 p.m. in London. The more- active August contract was at $69.20 a barrel.

U.S. gasoline supplies probably rose 1.2 million barrels in the week to June 15, according to the median estimate of 16 analysts in the Bloomberg survey. Stockpiles held 201.5 million barrels on June 8, or 5.2 percent below the five-year average for the period.

The Department of Energy will publish its weekly inventory report at 10:30 a.m. in Washington.

Brent crude oil for August settlement declined as much as 71 cents, or 1 percent, to $71.13 a barrel on the ICE Futures exchange and traded for $71.28 at 1:18 p.m. London time.

Nigerian Strike

Nigerian labor unions began a strike at midnight to protest an increase in domestic fuel prices. The unions want the increase reversed, said Peter Akpatason, the president of the National Union of Petroleum & Natural Gas Workers. The government said two days ago it would cut the increase by half, reducing prices to 70 naira (55 cents) a liter from 75 naira, he said.

The strike had no effect on production by Chevron Corp.'s Nigeria unit, said Femi Odumabo, a company spokesman. Workers belonging to the two biggest oil unions did strike, he said.

Chevron yesterday resumed production of 42,000 barrels of oil a day that had been suspended after an attack on a flow station on June 17. Since early 2006, violence has forced Royal Dutch Shell Plc and Eni SpA units in Nigeria to halt output totaling more than 600,000 barrels a day, more than a quarter of the country's output.

Nigeria was the fourth-largest source of U.S. oil imports in the first four months of the year. Its low-sulfur crude is favored by U.S. refiners, who are increasing gasoline output to meet summer demand from June through August.

Refineries Ramp Up

U.S. refineries probably operated at 90 percent of capacity, up 0.8 percentage point from the week before, according to the survey. They ran at 89.2 percent of capacity in the week ended June 8, the lowest rate for the period in 15 years.

U.S. oil stockpiles have barely changed since May 24 and held 342.4 million barrels on June 8, or 7.5 percent more than the five- year average for the period, the Energy Department said last week. Inventories probably fell by 50,000 barrels last week, according to the analyst survey.

Ten tropical storms may form in the Atlantic during the rest of this summer, U.K. government forecasters said yesterday. The North Atlantic hurricane season runs from June to November and has produced an average 12.5 storms annually since 1990.

Hurricanes Katrina and Rita struck the Gulf of Mexico during the record 2005 season and did $17 billion of damage to oil and gas pipelines, production platforms and refineries.

source:www.bloomberg.com