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Oil drops amid speculation supplies to increase

Oil declined for a third day amid speculation that a US government report will show stockpiles of crude and heating oil rose.

Oil fell below $80 a barrel after the industry-funded American Petroleum Institute said yesterday that supplies of distillate fuel, a including heating oil and diesel, rose 3.6 million barrels last week.

Analysts surveyed by Bloomberg News forecast a 1.3 million-barrel drop when the Department of Energy (DOE) releases inventory data at 10:30am in Washington.

“The strength in all the builds in products gave everyone a scare,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “If the DOEs confirm that, we could see a repeat of what happened yesterday, when the products pulled crude down.”

Crude oil for February delivery dropped 60 cents, or 0.7pc, to $80.19 a barrel at 9:13am on the New York Mercantile Exchange.

Yesterday, the contract fell 2.1pc to settle at $80.79, the biggest one-day decline since December 9.

Inventories of crude oil in the US, the biggest energy-consuming country, increased 1.2 million barrels last week to 330.1 million, the API said.

Analysts expect the DOE to report that supplies gained by 1.5 million barrels from 327.3 million barrels, according to the Bloomberg News survey.