By Ann Koh and Ben Sharples Jan. 13 (Bloomberg) -- Oil declined for a third a day after China raised bank reserve requirements to curb a credit boom and prevent the economy from overheating, and as an industry report showed an increase in U.S. crude and distillate stockpiles. Oil fell 2.1 percent yesterday as China, the second-largest energy-consuming nation, increased the proportion of deposits banks must set aside for the first time since 2008. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 3.6 million barrels last week, a report from the American Petroleum Institute showed yesterday. “There’s a signal sent by the Chinese government that they will try to neutralize their expansionary monetary policy,” said Gideon Lo, an analyst at DBS Vickers in Hong Kong. “That may give some overhang to oil, but the effect may be mainly on investment demand. I still think actual oil demand is on the way to recovery.” Crude oil for February delivery dropped as much as $1.01, or 1.3 percent, to $79.78 a barrel in electronic trading on the New York Mercantile Exchange. It was at $80.03 at 1:43 p.m. Singapore time. Yesterday, the contract fell $1.73 to settle at $80.79, the biggest one-day decline since Dec. 9. China’s move will help remove about 300 billion yuan ($44 billion) of liquidity from the Chinese economy, according to estimates by Xing Ziqiang, an economist in Beijing at China International Capital Corp., ranked the top China local brokerage by Asiamoney magazine last year. Alcoa Earnings “A disappointing start to the corporate earnings season combined with another effort by Chinese officials to rein in bank lending seemed to have a negative impact on the commodity complex, including oil,” said Toby Hassall, a CWA Global Markets Pty commodity analyst in Sydney. “It was a hefty distillate build, especially considering the weather in the northern hemisphere.” Alcoa, the first Dow Jones Industrial Average company to report fourth-quarter earnings, tumbled 11 percent in its biggest drop since March. Electronic Arts Inc. plummeted 7.8 percent after the video-game publisher reported preliminary results that fell short of analysts’ estimates. Inventories of crude oil in the U.S., the biggest energy consumer, increased 1.2 million barrels last week to 330.1 million, yesterday’s API report showed. The U.S. government is forecast to report a 1.5 million-barrel gain in supplies from 327.3 million barrels last week, according to a Bloomberg News survey of analysts before the release of Energy Department figures today. Distillate Forecast U.S. distillate fuel stockpiles reported by the department are forecast to decline for a fifth week as demand increased during the cold snap, according to the Bloomberg News survey. Supplies probably dropped 1.3 million barrels last week, based on the median estimate from 18 analysts in the survey. 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. The Energy Department will release its Weekly Petroleum Status Report at 10:30 a.m. in Washington. Oil also dropped yesterday amid predictions for above- average temperatures in eastern cities including New York and Boston this week. The Northeast accounts for four-fifths of U.S. heating oil consumption. The National Weather Service is predicting temperatures in New York City will increase to 44 degrees Fahrenheit (7 Celsius) by Jan. 15 from sub-freezing levels earlier in the week. U.S. stocks fell yesterday, with the Standard & Poor’s 500 Index retreating for the first time this year. Brent crude for February settlement fell as much as 88 cents, or 1.1 percent, to $78.42 a barrel on the London-based ICE Futures Europe exchange. It was at $78.74 a barrel at 1:45 p.m. in Singapore. Yesterday it dropped $1.67, or 2.1 percent, to $79.30 a barrel, declining for a fourth day. To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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