By Mark Shenk Aug. 14 (Bloomberg) -- Crude oil fell after a report showed that confidence among U.S. consumers unexpectedly declined in August for a second consecutive month, bolstering skepticism that fuel demand will rebound this year. Oil tumbled as much as 3.1 percent after the Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2 from 66 in July. Oil also declined as the dollar gained against the euro, reducing the appeal of commodities to investors looking for an inflation hedge. “Consumers are worried about the economy, and that’s raising concerns about demand,” said Phil Flynn, vice president of research at PFGBest, a Chicago-based brokerage. “Just a few days ago people were worried about inflation. That’s no longer the case.” Crude oil for September delivery declined $2.08, or 3 percent, to $68.44 a barrel at 10:58 a.m. on the New York Mercantile Exchange. Futures have risen 53 percent this year and are down 3.5 percent this week. Economists forecast the confidence index would rise to 69, according to the median of 61 projections in a Bloomberg News survey conducted before the report’s release. U.S. equities also declined on the consumer confidence report. The Standard & Poor’s 500 Index slipped 1.5 percent to 997.43 and the Dow Jones Industrial Average declined 1.4 percent to 9,267.07. The cost of living in the U.S. was unchanged in July, as the recession sapped companies’ pricing power. Compared with a year earlier, consumer prices were down 2.1 percent, the biggest 12-month decrease since 1950, according to Labor Department data released today in Washington. Brent Premium Brent crude oil for September settlement declined 39 cents, or 0.5 percent, to $73.09 a barrel on London’s ICE Futures Europe exchange. Brent futures traded at a $4.50 premium to oil traded in New York, the biggest premium since February. The September contract expires today. The more-active October contract slipped $1.04, or 1.4 percent, to $72.90. U.S. crude-oil supplies increased by 2.52 million barrels to 352 million in the week ended Aug. 7, an Energy Department report on Aug. 12 showed. Stockpiles in Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is stored, rose 281,000 barrels to 33.6 million, the highest since March. “Brent is now trading at a substantial premium to WTI,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “This tells us that the U.S. market is grossly oversupplied.” Crude oil futures may fall next week on speculation that U.S. fuel inventories will extend gains, according to a survey of analysts. Twenty of the 40 analysts surveyed by Bloomberg News, or 50 percent, said futures will decline through Aug. 21. Ten respondents, or 25 percent, forecast that the market will rise and 10 said prices will be little changed. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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