Oil falls 6.8% on speculation supplies rose

NEW YORK - Crude oil prices fell on speculation that US inventories climbed for a ninth week as demand declined.

An Energy Department report due today will probably show that supplies rose 1 million barrels last week, according to a Bloomberg News survey. Fuel demand during the four weeks ended Nov. 14 was down 7 percent from a year earlier, the department said last week.

"We are gearing up for tomorrow's report and most people expect it to show another inventory build," said Gene McGillian, an analyst at Tradition Energy in Stamford, Conn. "What the market does this week will hinge on how big a build we get in the report."

Crude oil for January delivery declined $3.73, or 6.8 percent, to $50.77 a barrel on the New York Mercantile Exchange. Futures have dropped 66 percent since July 11.

Prices surged Monday after the government gave Citigroup Inc., the second-biggest US bank by assets, $306 billion of loan guarantees over the weekend.

The US economy in the third quarter shrank faster than previously estimated as consumer spending fell the most in almost three decades. Gross domestic product contracted at a 0.5 percent annual pace over the period, the most since the 2001 recession, the Commerce Department reported yesterday. The United States consumes 24 percent of the world's oil.

Gasoline inventories probably increased 500,000 barrels from 198.6 million barrels the week before, according to the median of 15 responses in the survey. Analysts were split over whether stockpiles of distillate fuel, a category that includes heating oil and diesel, rose or fell.

Oil ministers from the 13-nation Organization of Petroleum Exporting Countries are scheduled to meet Saturday in Cairo. Slowing global demand growth has left a 1 million-barrel-a-day oversupply that needs to be removed by the end of the year, Venezuela's oil minister, Rafael Ramirez, said last Sunday. OPEC will hold another summit on Dec. 17 in Algeria.

"OPEC has some power to control prices but nowhere near what they would like," said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Conn. "They will have to weigh their options carefully. There is a risk that they could cut production too much."

Russia may coordinate oil production cuts with OPEC as the world's second-largest crude exporter reels from falling energy prices. The country can't rule out cutting output together with OPEC, Energy Minister Sergei Shmatko said at a conference in New Delhi yesterday.