By Ben Sharples and Christian Schmollinger Jan. 27 (Bloomberg) -- Crude oil traded below $75 a barrel as the dollar strengthened against the euro, reducing the appeal of commodities as an alternative investment. Oil dropped 0.7 percent yesterday as the dollar gained against its major counterparts on speculation China will take further steps to cool its economy. A U.S. government report today will probably show oil supplies in the world’s biggest energy user rose, according to a Bloomberg News survey. “The short-term outlook is really not showing too much brightness,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. “We are still waiting for the U.S. and Europe to show some material improvement in their economies.” Crude oil for March delivery traded at $74.49 a barrel, down 22 cents, in electronic trading on the New York Mercantile Exchange at 3:25 p.m. Singapore time. Yesterday, the contract dropped 55 cents to settle at $74.71. Oil stockpiles reported by the Energy Department probably climbed 1.58 million barrels in the week ended Jan. 22 from 330.6 million the prior week, according to the median of 18 analyst estimates in the Bloomberg News survey of analysts. Refining rates, already at their lowest level outside the Atlantic hurricane season since at least 1989, probably fell 0.1 percentage point. Distillate stockpiles, a category that includes heating oil and diesel, are expected to fall by 1.9 million barrels, the survey said. If the Energy Department numbers follow the forecasts, that would be counter to American Petroleum Institute data that was released late yesterday. Inventories of crude fell by 2.23 million barrels last week to 326.1 million, the industry group said. Distillate fuel supplies dropped 1.98 million barrels. Gasoline supplies rose 916,000 barrels to 228.5 million barrels, the highest since March 1999, the API said. Crude Inventories The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey. Oil-supply totals from the API and DOE moved in the same direction 75 percent of the time over the past four years, according to data compiled by Bloomberg. The Energy Department is scheduled to release its inventory report at 10:30 a.m. today in Washington. The dollar rose against the euro as investors sold the European currency on concern about fiscal deficits in the region. The dollar traded at $1.4049 to the euro at 3:18 p.m. Singapore time, from $1.4072 yesterday. Crude also dropped on speculation that oil demand may wane in China because of concerns of a slowing economy after banks began restricting new loans in response to a push by regulators to contain credit. China Demand Lending growth in China slowed in the third week of January from the month’s first two weeks, the Shanghai Securities News reported yesterday, citing unidentified people. “China has been underpinning demand for oil and other commodities, so the idea that they’re going to rein things in is certainly a negative for sentiment,” Hassall said. Chinese demand for oil is still outpacing more industrialized economies in Asia. Japan dropped to third among oil importers, behind the U.S. and China, in 2009 as its stagnant economy and aging population slashed fuel demand, according to government data. Japan bought 213 million kiloliters, or about 3.67 million barrels a day, 11.9 percent less than a year earlier, according to a preliminary finance ministry trade report today. That compares with the 4.1 million barrels a day China imported last year, according to figures from the General Administration of Customs in Beijing on Jan. 10. Brent crude for March settlement was at $73.10 a barrel, down 19 cents, on the London-based ICE Futures Europe exchange at 3:26 p.m. Singapore time. The contract declined 40 cents, or 0.5 percent, to $73.29 a barrel yesterday. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Christian Schmollinger in Singapore at Christian.s@bloomberg.net

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