By Grant Smith Jan. 13 (Bloomberg) -- Oil declined for a third a day on speculation China’s decision to raise bank requirements may hinder growth, while an industry report showed U.S. stockpiles accumulating. Oil dipped below $80 a barrel in New York to its lowest in more than a week after 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. “Sentiment is turning negative so that all the things that supported prices before are going in reverse,” said Eugen Weinberg, commodity strategist with Commerzbank AG in Frankfurt. “The Chinese decision doesn’t affect physical oil demand, but it does affect sentiment, and that’s the most important thing for driving prices.” Crude oil for February delivery dropped as much as $1.16, or 1.4 percent, to $79.63 a barrel in electronic trading on the New York Mercantile Exchange. It was at $80.01 at 11:52 a.m. London 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. Chinese Effort “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.” 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. 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. Terminal Pipelines 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. Brent crude for February settlement dropped for a fifth day, falling as much as $1.09, or 1.4 percent, to $78.21 a barrel on the London-based ICE Futures Europe exchange. It was at $78.56 a barrel at 11:52 a.m. in London. Yesterday it declined $1.67, or 2.1 percent, to $79.30 a barrel. The February contract expires tomorrow.

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