Sept. 23 (Bloomberg) -- Crude oil fell in New York before a report forecast to show that U.S. inventories of heating oil and other distillate fuels rose from their highest in 26 years. The Energy Department may report a 1.45 million-barrel increase in U.S. distillate fuel inventories in the week to Sept. 18, according to the median of estimates in a Bloomberg survey. Stockpiles, which also include diesel, were previously at 167.8 million barrels, the most since January 1983. “The market seems well supplied,” said Carsten Fritsch, an analyst with Commerzbank AG in Frankfurt. “Fundamentals don’t justify $70 a barrel. It’s too high. We expect a sharp decline in crude-oil prices towards the end of the year.” Crude oil for November delivery dropped as much as 74 cents, or 1 percent, to $71.02 a barrel, in electronic trading on the New York Mercantile Exchange, and traded for $71.10 at 11:30 a.m. London time. The contract for October expired yesterday, settling at $71.55 a barrel, up $1.84. Futures have gained 60 percent this year on speculation global fuel consumption may recover as economies emerge from recession. Yesterday, the industry-funded American Petroleum Institute said that U.S. gasoline supplies increased 3.8 million barrels to 212.6 million last week. No Decisive Break Crude stockpiles rose 276,000 barrels to 337.2 million last week, the highest in three weeks. Distillate inventories fell 1.9 million barrels to 168.4 million, the API’s report showed. “Macroeconomic conditions are improving, but in fundamental data specific to oil, we haven’t really seen a decisive break to the upside,” said Yingxi Yu, a commodities analyst at Barclays Capital in Singapore. “Until we see positive data coming through into the market, particularly on the demand side, it’s very hard to see oil breaking through the range that has held so well for the whole of the third quarter, which is around $65 to $75,” Yu said. The dollar extended its losses amid speculation the Federal Reserve will keep interest rates low, which makes it attractive for investors to buy commodities including oil and gold. The U.S. currency traded at $1.4779 per euro at 11:26 a.m. in London, after falling as low as $1.4843, the weakest level since Sept. 22, 2008. “The plunge in the dollar has been very supportive not just for oil but also for a lot of other commodities across the complex,” Yu said. Supply-Demand Fundamentals Brent crude oil for November settlement dropped as much as 85 cents, or 1.2 percent, to $69.68 a barrel on the London-based ICE Futures Europe exchange. The contract traded at $69.79 at 11:30 a.m. London time. Gasoline supplies probably gained 500,000 barrels from 207.7 million a week earlier, which would be a third weekly climb, the survey showed. Commercially held crude oil inventories probably dropped 1.4 million barrels from 332.8 million, based on the median of 17 responses. Thirteen of the analysts polled said stockpiles declined and four forecast an increase. The Energy Department is scheduled to release its Weekly Petroleum Status Report at 10:30 a.m. in Washington. Oil-supply totals from the API and DOE moved in the same direction 76 percent of the time over the past four years, according to data compiled by Bloomberg. “We’ve been expecting a demand recovery but we still haven’t seen much of a justification in the supply-demand fundamentals,” said Toby Hassall, a research analyst with CWA Global Markets Pty in Sydney. “The underlying supply-demand profile still suggests the market could be vulnerable to a pullback.” To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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