Oil is little changed after falling below $70 on equities drop

Crude oil was little changed after falling below $70 a barrel in New York on declines in stock markets and speculation supplies increased in the US, the largest energy-consuming nation.

Oil retreated as Asian shares fell for the first time in three days and the Standard & Poor’s 500 Index registered its biggest drop in more than a month. US oil inventories probably rose 1 million barrels last week as refiners processed less crude, a Bloomberg survey of 12 analysts showed before a weekly government report today.

“We do see some downside risk in the near term,” said Yingxi Yu, a commodities analyst at Barclays Capital in Singapore. “It’s really coming from the recent build in crude stocks at Cushing, Oklahoma, which is the main delivery point. It’s edging closer to operable capacity.”

Crude oil for September delivery traded at $69.44 a barrel, down 1 cent, on the New York Mercantile Exchange at 12:25 p.m. in Singapore. Yesterday, the contract fell $1.15, or 1.6 per cent, to settle at $69.45. It was the fourth daily decline and the first time oil settled below $70 this month. Futures have advanced 56 per cent in 2009.

An increase in U.S. oil stockpiles would be the third consecutive gain. Gasoline inventories probably dropped 1.2 million barrels last week, according to the survey.

Petroleum Institute

Oil climbed as high as $69.80 today after the American Petroleum Institute reported that U.S. crude oil stockpiles declined 1.42 million barrels to 348.5 million last week.

“Inventories are relatively high and there’s no strong demand pressure on price,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “In developed economies, oil demand still seems subdued.”

The S&P 500 lost 1.3 per cent to 994.35 in New York, partly on concern bank earnings won’t improve in the second half of the year. The Dow Jones Industrial Average slipped 1 per cent to 9,241.45. The MSCI Asia Pacific Index was down 1.1 per cent to 111.53 at 1:06 p.m. in Tokyo, after a two-day climb.

“It looks like we’ve picked a direction because the S&P 500 has picked a direction,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “There’s also some disappointment here that OPEC didn’t add a million barrels a day to their demand forecast or make any significant bullish revision to their outlook.”