Dec. 9 (Bloomberg) -- Crude oil fell to a two-month low after a government report showed that U.S. fuel inventories climbed as refineries bolstered operating rates. Stockpiles of crude oil fell 3.82 million barrels to 336.1 million last week, the Energy Department said. Gasoline inventories climbed more than forecast and supplies of distillate fuel, a category that includes heating oil and diesel, climbed for the first time in four weeks. “The report was a mixed bag,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “The drop in crude-oil stockpiles was a bit of a surprise, but it was balanced by builds in fuel.” Crude oil for January delivery fell $1.01, or 1.4 percent, to $71.61 a barrel at 12:04 p.m. on the New York Mercantile Exchange. Futures dropped as much as 1.6 percent to $71.45, the lowest since Oct. 9. Oil traded at $73.05 a barrel before the release of the report at 10:30 a.m. in Washington. A 250,000-barrel gain in stockpiles of crude oil was forecast, according to the median of 16 analyst estimates in a Bloomberg News survey. Gasoline inventories rose 2.25 million barrels to 216.3 million, the report showed. Stockpiles were forecast to increase by 1.6 million barrels, according to the Bloomberg News survey. Supplies of distillate fuel increased 1.62 million barrels to 167.3 million. Inventories were estimated to decline by 750,000 barrels. Refinery Operations Refineries operated at 81.1 percent of capacity, up 1.4 percentage points from the previous week, and the highest level since October. A 0.2 percentage-point gain was forecast. “The most positive news in the report is that refineries are back up and running,” said Phil Flynn, vice president of research at PFGBest in Chicago. “They are probably up on expectations that demand will increase in the months ahead. They are also trying to reduce stockpiles before the end of the year because of tax considerations.” The increase in fuel supplies reduced the hypothetical profit margin, or crack spread, for refining crude. The margin for processing three barrels of oil for November delivery into two of gasoline and one of heating oil declined 9.4 percent to $8.29 a barrel, based on futures prices. It was the biggest one- day decline since Nov. 3. The crack spread increased to $9.141 yesterday, the highest since Aug. 20. “The crack spread has been increasing, and this has been a signal for refiners to increase operating rates,” O’Grady said. “They are still operating at extraordinarily depressed rates, but they are moving higher, which is a good sign.” To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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