June 3 (Bloomberg) -- Crude oil fell the most in two weeks after a government report showed that U.S. supplies unexpectedly increased as fuel consumption plunged to a 10-year low.
Inventories climbed 2.9 million barrels to 366 million in the week ended May 29, according to the Energy Department. The gain occurred as imports surged 9.9 percent and refineries increased operating rates to the highest level in six months. Fuel demand fell to the lowest since May 1999.
“The high inventories and weak demand we’re seeing don’t justify prices in the $60s,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston. “The fundamentals are catching up with the market. Prices have gotten ahead of where they should be.”
Crude oil for July delivery fell $2.43, or 3.5 percent, to settle at $66.12 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the biggest decline since May 15. Futures are up 48 percent this year.
Prices jumped $7.53 between May 21 and June 1, the longest rally in a year, as the weakening dollar bolstered the appeal of energy and metals futures as an alternative investment and equities rose. Oil fell 3 cents yesterday.
“While there are some positive signs in the economy, there’s not enough to justify $70 crude,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago, a division of MF Global Ltd. “The key is tomorrow. If we can get another negative move, then you’ll start to see the liquidation taking hold.”
The Energy Department report was forecast to show that crude-oil stockpiles fell 1.5 million barrels, according to the median of 15 estimates by analysts surveyed by Bloomberg News. more...
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