Oil declined for a second day as concern Europe’s debt crisis is spreading drove speculation fuel demand will drop and as an industry report showed U.S. gasoline supplies surged the most since January. Futures extended yesterday’s 0.8 percent slide as traders secured profits from a rally to $90.76 a barrel, the highest in 26 months. European ministers ruled out immediate aid for Portugal and Spain or an increase in the 750 billion euro ($992 million) crisis fund. The American Petroleum Institute said gasoline stockpiles increased 4.8 million barrels last week. “There are still concerns about the European economy,” said Ken Hasegawa, a commodity derivative sales manager at Newedge, a brokerage, in Tokyo. “This increase in products is having a larger impact on the crude oil market. Ninety dollars will be a major resistance level. It’s a good time to take profit.” Crude for January delivery lost as much as $1.07, or 1.2 percent, to $87.62 a barrel, in electronic trading on the New York Mercantile Exchange. The contract was at $87.71 at 1:08 p.m. Singapore time. Yesterday, it snapped a four-day rally after rising to the highest since Oct. 8, 2008. Europe’s economic situation is serious and its institutions must act more quickly to stem contagion from the sovereign-debt crisis, International Monetary Fund Managing Director Dominique Strauss-Kahn said in Athens yesterday. “The market continues to worry over Europe’s ability to prevent debt issues from spreading,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. “Crude prices lost momentum, potentially as cautious long investors took profits due to uncertainty in the market.” Crude Stockpiles Oil has risen 11 percent this year in New York, heading for its second consecutive annual increase. The market soared 78 percent in 2009, the most since prices more than doubled in 1999. U.S. crude stockpiles decreased 7.34 million barrels to 349.3 million last week, the industry-funded API said yesterday. An Energy Department report today will probably show supplies dropped 1.4 million barrels, according to the median estimate from 16 analysts surveyed by Bloomberg News. Distillate fuel inventories, which include heating oil and diesel, increased 1.7 million barrels to 159.3 million, the API said. The Energy Department’s report, due at 10:30 a.m. in Washington, is expected to show stockpiles declined 900,000 barrels, based on the survey. Gasoline inventories probably slipped 300,000 barrels. “Investors will be closely watching U.S. oil inventory reports for evidence of improved demand,” said Pervan at Australia & New Zealand Banking Group. OPEC Supply Oil’s rally is unlikely to coax OPEC into raising production quotas at a meeting this week in Ecuador, as group members consider the global economic recovery strong enough to withstand price gains. The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, will maintain limits set in 2008 when representatives gather in Quito on Dec. 11, according to all but one of 39 analysts and traders in a Bloomberg News survey. Oil ministers from Angola, Venezuela and Libya say the group will probably stand by its target to pump 24.845 million barrels a day. Brent crude for January settlement fell as much as $1.12, or 1.2 percent, to $90.27 a barrel on the London-based ICE Futures Europe exchange. Yesterday, the contract dropped 6 cents to end the session at $91.39. To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Canberra at bsharples@bloomberg.net To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net.

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