Oil Set for Biggest Weekly Decline Since February on Recession

(Bloomberg) -- Crude oil fell, poised for the biggest weekly decline since February, amid forecasts the recession will curb demand at a time when U.S. inventories are already at their highest in almost 19 years.

U.S. crude-oil inventories rose 5.67 million barrels to 366.7 million last week, the highest since September 1990, the Energy Department said April 15. The International Energy Agency reported April 10 that worldwide consumption will shrink by 2.8 percent in 2009 as the global economy contracts.

“The demand outlook continues to look quite bleak,” said Toby Hassall, an analyst at Commodity Warrants Australia Ltd. in Sydney. “The fundamentals of the oil market haven’t really shown any signs of improvement.”

Crude oil for May delivery fell as much as 48 cents, or 1 percent, to $49.50 a barrel, and traded at $49.68 at 11:36 a.m. Singapore time on the New York Mercantile Exchange. Oil has dropped 4.9 percent this week, set for its sharpest decline since the week ended Feb. 13.

Oil in New York has tumbled 66 percent from a record $147.27 a barrel in July as the recession in major consuming countries curbed fuel demand.

U.S. fuel demand in the first quarter fell to the lowest for the period in 11 years, the American Petroleum Institute said in a monthly report yesterday. Deliveries of petroleum products, a measure of consumption, averaged 19.2 million barrels a day, 3.4 percent less than during the same period in 2008, the industry-funded API said.

Jobless Claims

Oil futures are up 12 percent so far this year. Crude climbed as much as 2.5 percent yesterday after the Labor Department reported that claims decreased by 53,000 to 610,000 in the week ended April 11, the fewest since January.

Chinese industrial production expanded by 8.3 percent in March from a year earlier, up from 3.8 percent in the first two months, the statistics bureau said yesterday in Beijing.

“It’s sort of a contest between hope and reality,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “A lot of these numbers that have bounced have bounced from extremely low levels, and so it only makes the markets a little less bearish. It doesn’t necessarily make them bullish.”

The Federal Reserve said in its Beige Book business survey April 15 that economic contractions were slowing or stabilizing in San Francisco, the largest district, as well as in New York, Chicago, Kansas City and Dallas.

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