By Ben Sharples and Christian Schmollinger March 11 (Bloomberg) -- Crude oil fell on speculation Chinese demand will slow as the government may end stimulus programs amid an increase in inflation and concern that recent price gains outpaced demand growth in the U.S. Chinese consumer prices surged 2.7 percent in February, a 16-month high, increasing expectations the government may end policies to fight the global recession, which may slow economic growth. U.S. refinery utilization fell last week for the first time in five weeks to 80.7 percent of capacity, an Energy Department report said yesterday. “This should be bearish because the Chinese government might tighten their monetary policy earlier than expected,” said Clarence Chu, a trader with options dealers Hudson Capital Energy in Singapore. “Speculators in China will cut down on their positions.” Crude oil for April delivery dropped as much as 59 cents, or 0.7 percent, to $81.50 a barrel, in electronic trading on the New York Mercantile Exchange. It was at $81.59 at 3:58 p.m. Singapore time. Yesterday, the contract rose 60 cents, or 0.7 percent, to $82.09, the highest settlement since Jan. 11. Oil rose yesterday as gasoline supplies dropped 2.96 million barrels last week, the Energy Information Administration said in its weekly inventory report. Crude stockpiles increased 1.4 million barrels compared with a Bloomberg News survey forecast of a 2 million-barrel gain. Total U.S. fuel consumption increased 0.2 percent to 19.7 million barrels a day last week, the highest level since August, the Energy Department report showed. That’s still 2.5 percent below the 20.2 million barrels a day refiners supplied in the week of March 14, 2008, before the effects of the global financial crisis. China Refining “We are at the high end of the recent trading range, which is one of the reasons why oil ducked lower,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “Demand in the U.S. is still weak, there is no doubt about that. It looks to be in the slow recovery mode.” Chinese demand for oil has supported prices as traders expect consumption in developing economies in Asia, including India, to make up for declines in Europe and the U.S. The country processed a record 31.9 million metric tons of crude in February, or about 8.35 million barrels a day, according to data released today by China Mainland Marketing Research Co., which compiles data for the government. That’s up 5.8 percent from January. Dollar Climbs Oil also fell today as the dollar climbed, reducing the appeal of commodities as an alternative investment. The dollar index, a measure against six other major currencies, rose 0.1 percent to 80.54 at 3:47 p.m. Singapore time. The greenback traded at $1.3632 per euro at 3:56 p.m. Singapore time, from $1.3657 yesterday. Prices also dropped today as the Organization of Petroleum Exporting Countries’ compliance with record supply cuts agreed to in 2008 slipped to 53 percent in February after members increased production. OPEC, which produces about 40 percent of the world’s oil, will meet in Vienna on March 17 to decide production quotas. “It is likely at the meeting OPEC will leave production targets unchanged and probably make a call for improved compliance,” Moore said. OPEC predicted members will need to produce more oil than previously forecast. The group will need to pump 28.94 million barrels a day to satisfy demand in 2010, according to a report yesterday. That’s about 190,000 barrels a day more than last month’s projection. Brent crude oil for April delivery fell as much as 55 cents, or 0.7 percent, to $79.96 a barrel on the London-based ICE Futures Europe exchange. It was at $80.02 a barrel at 4:12 p.m. Singapore time. Yesterday, the contract rose 57 cents, or 0.7 percent, to end the session at $80.48. To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net

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