Oil declines as US supply increases twice as much as forecast

April 18 (Bloomberg) -- Crude futures fell after the U.S. government reported a larger-than-expected supply gain amid speculation a slowing European economy may reduce demand.

Prices dropped as much as 1.5% after the Energy Department said oil inventories rose 3.86 million barrels to 369 million last week. Supplies were forecast to grow 1.8 million barrels in a Bloomberg survey. Refinery utilization was 84.6 percent. Adam Posen, a Bank of England policy maker, ended support for more stimulus while bad loans surged in Spain.

“It’s another week of the battle of large numbers,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The refinery industry continues to operate at sub-optimal levels and crude oil of course is going to build if they are not processing it.”

Crude for May delivery slid $1.42, or 1.4%, to $102.78 a barrel at 11:19 a.m. on the New York Mercantile Exchange. Earlier, they touched $102.64. Oil traded at $103.64 a barrel before the release of the report at 10:30 a.m. in Washington. Prices have risen 4% this year.

Brent for June settlement fell $1.81, or 1.5%, to $116.97 a barrel on the London-based ICE Futures Europe exchange.

The European benchmark contract’s premium to West Texas Intermediate for the same month narrowed to as little as $13.06 in intraday trading, the lowest level since Feb. 1. It was at $13.77 a barrel at 11:20 a.m. in New York.

Oil Supplies

Oil inventories are at the highest level since the week ended May 27, the department report showed. The industry-funded American Petroleum Institute reported yesterday that oil supplies rose 3.41 million barrels to 369.3 million last week.

Gasoline inventories fell 3.67 million barrels to 214 million last week. Stockpiles were forecast to slip 1.1 million barrels, according to the Bloomberg survey.

Distillate supplies, which include heating oil and diesel, dropped 2.91 million barrels to 129 million. Stockpiles were estimated to fall 125,000 barrels.

Posen ended his push for further Bank of England stimulus, joining the majority of the nine-member Monetary Policy Committee in seeking no change to the 325 billion-pound ($517 billion) asset-purchase target, according to minutes of their April 4 to April 5 meeting published today in London.

Spain’s non-performing loans as a proportion of total lending jumped to 8.16% in February, the highest level since 1994, from less than 1% in 2007, according to Bank of Spain data published today. The ratio rose from 7.91% in January as 3.8 billion euros of loans soured in February, more than double the amount from the same month a year ago.

“We still have economic concerns coming out of Europe,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut

Bloomberg News

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