Oct. 28 (Bloomberg) -- Crude oil fell after a U.S. Energy Department report showed an unexpected increase in gasoline inventories and as crude supplies climbed to a two-month high. Gasoline stockpiles gained 1.62 million barrels last week, the department said. A 1 million-barrel decline was forecast, according to the median of responses in a Bloomberg News survey. Oil inventories rose to the highest level since August as imports advanced for the first time in five weeks. “This report is fairly bearish because we were expecting a draw in gasoline supplies and instead saw a rather sizable increase,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. Crude oil for December delivery fell $1.66, or 2.1 percent, to $77.89 a barrel at 10:56 a.m. on the New York Mercantile Exchange. Futures touched $77.60, the lowest since Oct. 16. Prices have gained 75 percent from the end of 2008 and reached a one-year high of $82 a barrel on Oct. 21. Oil traded at $78.61 before the release of the report at 10:30 a.m. in Washington. Gasoline for November delivery declined 6.15 cents, or 3 percent, to $2.009 a gallon in New York. Futures are heading for the biggest decline since Sept. 24. Inventories of crude oil rose 778,000 barrels to 339.9 million last week, the report showed. The gain left supplies 9.1 percent higher than the five-year average for the period. A 1.91 million-barrel increase was forecast, according to the median of 16 estimates by analysts surveyed by Bloomberg News. Imports of crude oil increased 2.2 percent to 8.89 million barrels a day last week, the report showed. Fuel imports climbed 6.3 percent to 2.54 million barrels a day. The industry-funded American Petroleum Institute reported late yesterday that that U.S. crude-oil stockpiles fell 3.53 million barrels to 339.5 million in the week ended Oct. 23. Stocks and Dollar Oil also dropped as global equities declined and the dollar increased against the euro. The MSCI World Index fell for a seventh straight day, the longest losing streak since January. “The stock market appears to have hit a ceiling and that raises questions about whether the oil market has as well,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “If the stock market drops, oil is vulnerable because it’s risen more than is justified by the fundamentals.” The U.S. currency climbed 0.2 percent to $1.4769 per euro from $1.4804 yesterday. A stronger dollar reduces the appeal of commodities to investors looking for an inflation hedge. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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