Crude oil fell for a third day

Crude oil fell for a third day on speculation that an Energy Department report will show U.S. refineries increased fuel output and signs that OPEC is considering a production increase.

The report tomorrow may show refineries operated at 91.6 percent of capacity, a 10-month high, according to a Bloomberg News survey. OPEC will raise output if required, an official of Iran's Oil Ministry said. Hedge-fund managers and other large speculators cut long positions, bets that prices would rise, last week, according to the U.S. Commodity Futures Trading Commission.

``We are seeing a shift in sentiment,'' said Tim Evans, an energy analyst at Citigroup Inc. in New York. ``Rising refinery runs will eventually boost product stocks, and if they are comfortable you don't need a long position in crude.''

Crude oil for September delivery fell $1.57, or 2.1 percent, to $73.32 a barrel at 10:13 a.m. on the New York Mercantile Exchange. Futures reached $76.13 on July 20, the highest intraday price for a front-month contract since Aug. 10. Prices are up 20 percent this year.

Brent crude oil for September settlement declined $1.49, or 1.9 percent, to $75.37 barrel on the London-based ICE Futures exchange.

``If the oil market needs it, OPEC will inject more oil into it,'' said Javad Yarjani, head of OPEC affairs at Iran's oil ministry, according the Islamic Republic News Agency. Iran is the second-biggest oil producer in the Organization of Petroleum Exporting Countries. Saudi Arabia is the largest producer.

`Only Real Debate'

``The Iranians are normally price hawks, so this is a sign that the only real debate at the next meeting will be about how large the increase will be,'' Evans said.

Oil ministers from OPEC's 12 members will meet on Sept. 11 in Vienna to discuss production targets. The group pumps about 40 percent of global crude supply.

``We're at a critical point,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. If we can't break out above $77.50 and test the old highs, prices could be heading to the $60 area. If prices get above $77.50, I see us rising $17.50 higher as we breach the old record.''

New York crude oil rose to a record $78.40 a barrel on July 14, 2006, on concern fighting in Lebanon between Israel and Islamic militia Hezbollah would spread through the Middle East.

The crude-oil market often follows gasoline during the summer driving season. U.S. gasoline demand peaks between the Memorial Day holiday in late May and Labor Day in early September.

Gasoline for August delivery plunged 6.46 cents, or 3.1 percent, to $2.0395 a gallon in New York. Futures touched $2.031 a gallon, the lowest since April 18. Prices are heading for the ninth decline in 10 days.

source:bloomberg.com