Oil Falls for Fourth Day on Signs Demand to Drop, Field Start

By Mark Shenk

June 18 (Bloomberg) -- Crude oil fell for a fourth day in New York on signs that slower economic growth will curb fuel usage and indications that output at an offshore Norwegian field may resume after a fire.

Housing starts and industrial production in the U.S., consumer of almost 25 percent of the world's oil, dropped last month, government reports showed yesterday. StatoilHydro ASA said its Oseberg field may resume operations this week after a fire on a platform halted production June 15.

``When we are down these days the market is focused on demand, and when we are up, supply concerns are at the fore,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``With gasoline at more than $4 and the economy slowing, there is ample evidence that demand will be hit.''

Crude oil for July delivery fell as much as 85 cents, or 0.6 percent, to $133.16 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract was at $133.50 a barrel at 8:27 a.m. in Sydney, having closed yesterday at $134.01, down 60 cents. Futures climbed to a record $139.89 a barrel on June 16. Prices are 93 percent higher than a year ago.

Futures in New York averaged over 200 days surpassed $100 a barrel for the first time yesterday. The so-called 200-day moving average indicator crossed $70 on Nov. 7, $80 on Feb. 8 and $90 on April 23. Traders use moving averages of different periods in conjunction with other statistical patterns for buying and selling decisions.

Volatile Market

The U.S. will release its weekly petroleum supply report later today. Saudi Arabia called a meeting of producers, major industrial nations and banks for June 22 in the country's Red Sea port of Jeddah to discuss stabilizing prices.

``The market's been incredibly volatile,'' said Jim Ritterbusch, president of Galena, Illinois-based energy consulting firm Ritterbusch & Associates. ``The upcoming inventory report and meeting in Jeddah are also on peoples' minds.''

Brent crude oil for August settlement fell 99 cents, or 0.7 percent, to settle at $133.72 a barrel on London's ICE Futures Europe exchange yesterday. Prices climbed to a record $139.32 on June 16.

Builders in the U.S. broke ground in May on the fewest houses in 17 years, a government report showed. Housing starts fell 3.3 percent to a 975,000 pace from a revised 1.008 million in April, the Commerce Department said today in Washington. Production in factories, mines and utilities declined 0.2 percent in May, the Federal Reserve said today.

Gasoline Prices

Gasoline for July delivery fell 0.79 cent to $3.41 a gallon at 8:03 a.m. in Sydney. Yesterday, the contract dropped 2 cents, or 0.6 percent, to settle at $3.4179 a gallon in New York. Futures reached a record $3.5762 a gallon on June 16.

Regular gasoline, averaged nationwide, fell 0.2 cent from a record to $4.078 a gallon, AAA, the nation's largest motorist organization, said yesterday on its Web site. It was the first drop in 11 days.

Kuwait's finance minister, Mustafa Al-Shimali, said a reasonable price for oil would be ``more or less $100'' in an interview in Isfahan, Iran. ``I think it's high,'' he said of the current price.

Kuwait pumped 3.595 million barrels of crude oil a day last month, making it the fourth-biggest oil producer in the Organization of Petroleum Exporting Countries, according to Bloomberg News figures. The Persian Gulf nation has the ability to produce 3.6 million barrels a day.

Kuwait's Capacity

``The Kuwaitis may want to see lower prices, but they can't add many barrels to the market,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago.

Saudi Arabia, the world's biggest oil exporter, announced last month that it would raise output by 300,000 barrels a day, and may announce a second increase at the meeting in Jeddah.

``I think traders are taking a second look at the expected increase in Saudi production,'' Flynn said. ``The prospect of additional oil will calm the market.''

Today's Energy Department report may show that U.S. fuel stockpiles rose and crude-oil inventories dropped last week, according to the median of forecasts in a Bloomberg News survey.

Gasoline supplies rose 675,000 barrels from 210.1 million barrels the prior week, the survey showed. Inventories of distillate fuel, a category that includes heating oil and diesel, climbed 1.9 million barrels.