By Rachel Graham Oct. 21 (Bloomberg) -- Oil declined for a second day, falling below $78 a barrel, before a U.S. government report expected to show crude inventories rose last week. Crude stocks rose 1.5 million barrels in the week ended Oct. 16, according to a survey of 15 analysts before the U.S. Department of Energy report later today. The industry-funded American Petroleum Institute yesterday said U.S. crude inventories increased. “The API data seems to have halted the market’s gallop with a surprising stock build,” Paul Harris, head of natural resources risk management at the Bank of Ireland, said from Dublin. The market is now looking to the Department of Energy report, he said. Crude oil for December delivery fell as much as $1.45, or 1.8 percent, to $77.64 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $77.79 a barrel at 12:43 a.m. London time. Crude prices have gained about 9 percent this month, tracking rising global equity markets and a weakening dollar. Futures traded at over $80 a barrel yesterday for the first time in over a year as the dollar index, which measures the U.S. currency against six peers, fell to its lowest since August 2008. Some investors buy dollar-priced commodities to hedge against a weaker U.S. currency. “We’ve come up quite quickly in the past couple of weeks,” Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg, said by phone from Stuttgart, Germany. “The U.S. report should give the market new direction.” API Report Brent crude oil for December settlement declined as much as $1.20, or 1.6 percent, to $76.04 a barrel on the London-based ICE Futures Europe exchange. The API report yesterday showed crude inventories in the U.S. added 3.85 million barrels last week. The Department of Energy report may show inventories of crude oil rose 1.5 million barrels in the week ended Oct. 16 from 337.8 million the prior week, according to the median of 15 estimates by analysts. Twelve of those surveyed forecast that stockpiles gained and three said there was a decline. Crude stocks in the U.S. are currently about 10 percent above last year’s level. The report, scheduled to be released at 10 a.m. in Washington, may show gasoline inventories fell 850,000 barrels from 209.2 million the week before, the survey showed. Supplies of distillate fuel, a category that includes heating oil and diesel, declined 1 million barrels from 170.7 million the prior week, according to the survey. Stocks in the week ended Oct. 2 were at the highest level since January 1983.

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