Oil declined for the first day in three as the dollar strengthened and analysts forecast an increase in US crude supplies last week, signaling that fuel demand in the world's biggest energy user may be slow to recover.
Oil dropped from yesterday's eight-week high as the greenback advanced against the euro, limiting investors' need for assets, such as commodities, to hedge against inflation. Crude inventories probably rose 2 million barrels last week, according to analysts surveyed before an Energy Department report tomorrow. Gasoline inventories probably rose 150,000 barrels from 231.9 million the previous week.
"The market is in oversupply for crude and products," said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo, "It will take more time to see market recovery."
Crude for April delivery dropped as much as 45 cents, or 0.6 per cent, to $US81.42 a barrel in electronic trading on the New York Mercantile Exchange. It was at $US81.52. Yesterday, the contract rose 37 cents to $US81.87, the highest settlement since Jan. 11.
The dollar traded at $US1.3612 per euro, from $US1.3634 yesterday.
US stockpiles
The Energy Department report scheduled for release tomorrow in Washington will probably show that US stockpiles of crude oil rose last week, according to the median of 12 estimates from analysts surveyed by Bloomberg News. Supplies climbed 4.03 million barrels to 341.6 million in the week ended Feb. 26, the highest level since August.
U.S. gasoline stockpiles rose 773,000 barrels to 231.9 million in the week ended Feb. 26 as heavy snow along the U.S. East Coast kept consumers off the roads. Six of the analysts surveyed anticipated an increase, five predicted a drop and one said supplies were unchanged.
Stockpiles of US distillate fuel, a category that includes heating oil and diesel, probably fell 1 million barrels from 151.8 million the prior week, according to the Bloomberg News survey.
"Inventories continue to build," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney. Crude oil prices have "broken to new highs, traded to new highs, yet the market is saying maybe we're not ready to get through there yet," he said.
$100 Oil
Iran's OPEC governor, Mohammad Ali Khatibi, said $US100 a barrel is a "good" price for oil, the state-run Mehr news agency reported. "In determining the crude oil price, global inflation and the swings in dollar value should be considered," Mehr cited Khatibi as saying.
Ministers from the 12-member Organization of Petroleum Exporting Countries will meet on March 17 in Vienna to decide whether to adjust production quotas. OPEC agreed at three meetings in 2008 that the 11 members with quotas would cut daily output by 4.2 million barrels, a record reduction, as demand tumbled during the worst global recession since World War II.
"It's much easier for this crude market to stay in the range of $75 to $80, as it satisfies OPEC and is acceptable for consuming countries," Newedge's Hasegawa said.
Brent crude for April delivery dropped as much as 47 cents, or 0.6 per cent, to $US80 a barrel on the London-based ICE Futures Europe exchange. It was at $US80.14. Yesterday, the contract rose 58 cents, or 0.7 per cent, to $US80.47, the highest settlement since Jan. 11.
