May 9th, 2012

Crude oil fell for a sixth day, the longest stretch of declines in almost two years, after U.S. crude supplies climbed and as Greece struggled to form a government, bolstering concern that Europe’s debt crisis will spread.

Crude oil futures declined as much as 1.5 percent after the American Petroleum Institute said late yesterday that stockpiles rose 7.8 million barrels last week to 378 million, the most since August 1990. A government report today may show supplies rose 2 million barrels, according to a Bloomberg survey. Equities fell and the euro weakened after weekend elections in Greece.

“Oil is taking a hit because we have more than ample supply and uncertainty on the economic front,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There’s a negative tone to equities and the euro because of changes in Europe, with Greece the chief concern at the moment. We’ve also had a large crude build in yesterday’s API.”

Crude oil futures for June delivery fell $1.19, or 1.2 percent, to $95.82 a barrel at 9:28 a.m. on the New York Mercantile Exchange. The contract slipped to $97.01 yesterday, the lowest close since Feb. 6. Prices are down 9.7 percent in six days, which is the longest downward run since July 2010.

Brent oil for June settlement dropped 95 cents, or 0.8 percent, to $111.78 a barrel on the London-based ICE Futures Europe exchange.

Gasoline Supplies

The Energy Department report is projected to show that gasoline supplies dropped 750,000 barrels last week, according to the median of 12 analyst responses in the Bloomberg survey. The report is scheduled for release at 10:30 a.m. in Washington.

“U.S. inventory levels are preventing oil having the traditional dead-cat bounce after such a steep fall,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London who predicts prices will recover this month. “The lows we’ve seen this week will probably hold and crude will likely rise as buying by funds and weakness in the dollar assist with a recovery.”

Crude oil is poised to rebound as global refiners increase purchases, Societe Generale SA (GLE) said in a report. Investors should buy Brent crude at $110 a barrel and West Texas Intermediate oil, the grade traded in New York, at $95 a barrel, according to Societe Generale SA.

The Energy Department reduced its 2012 price projection for crude oil as supply is forecast to expand faster than fuel consumption. Oil in New York will average $104.12 a barrel this year, down 1.5 percent from the April forecast of $105.72, the department’s Energy Information Administration said yesterday in its monthly Short-Term Energy Outlook.

- Mark Shenk in New York at Bloomberg.