Oil dropped in New York for a sixth day as rising U.S. supplies signaled slowing demand in the world’s biggest crude user. Brent crude widened its premium over New York oil to a record of more than $16 a barrel. New York futures slid as much as 0.9 percent after inventories climbed for a fourth week, the longest stretch of gains since May, according to the U.S. Energy Department. The Organization of Petroleum Exporting Countries has spare production capacity of 5.4 million barrels a day, Bank of America Merrill Lynch wrote in a report. “OPEC’s spare capacity and crude inventories can’t justify prices above $100 a barrel,” said Axel Herlinghaus, senior commodities analyst at DZ Bank AG in Frankfurt, which trades Brent and WTI contracts. Crude for March delivery on the New York Mercantile Exchange fell as much as 75 cents to $85.96 a barrel and was at $86.49 at 1:02 p.m. London time. Brent for March settlement was up 33 cents at $102.15 on London’s ICE Futures Europe exchange. London-traded Brent futures advanced to more than $100 a barrel for the first time since 2008 at the end of last month, partly because of concern that unrest in Egypt may lead to a disruption of supplies from the Middle East. New York crude is lagging behind Brent after supplies at Cushing, Oklahoma, the delivery point for U.S. futures, rose to a record high last month. The difference reached $16.07 today, compared with $11.77 at the beginning of the week. It averaged 76 cents last year. North Africa Premium The disturbances in North Africa are adding a premium of roughly $5 a barrel to crude, according to DZ Bank. “Tensions in north Africa are keeping prices high,” Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich, said by phone from Vienna. “As long as those risks remain, we’ll continue to see a premium.” Hundreds of thousands of people have demonstrated in Cairo’s Tahrir Square since Jan. 25, seeking an end to President Hosni Mubarak’s rule. The unrest has stoked concern that crude supplies through the Suez Canal and adjacent Suez-Mediterranean Pipeline, which ship 3.5 percent of global oil output, may be interrupted. Brent crude will fall to less than $90 a barrel in the short term, partly because of spare production capacity among OPEC members and slowing demand growth in emerging markets, according to Merrill. Curbing Demand Rising oil prices are starting to curb demand, Francisco Blanch, head of global commodities research at Merrill, wrote in the report dated yesterday. That “could soon bite into consumption” in the U.S., he said. “The end of the Northern Hemisphere winter is around the corner,” according to the report. “We continue to see fast Emerging Markets Central Bank rate hikes, and high prices are starting to create some demand destruction.” Worldwide oil consumption will increase by 1.5 million barrels a day this year, or 1.7 percent, to 89.3 million a day, the International Energy Agency said today in its monthly Oil Market Report. The gain from last month’s estimate amounts to 140,000 barrels a day. “The inescapable conclusion from our market balances is that the physical market has tightened significantly,” the Paris-based adviser said. “Remarkably strong oil demand ran well ahead of global supplies” at the end of 2010, it said. To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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