Oil Trades Near $79 on Expectation U.S. Inventories May Rise

Crude oil traded near $79 a barrel after dropping the most in seven weeks yesterday on speculation U.S. inventories rose.

Crude oil stockpiles in the U.S. probably rose for a third time last week as refiners shut units for pre-winter maintenance, according to an analyst survey. Oil, gold and copper fell yesterday as the dollar rose the most in two months against the euro after investor expectations of further U.S. rate cuts declined.

``This week we should see stronger inventory numbers that should drive prices down further,'' said Steve Rowles, analyst at CFC Seymour Ltd. in Hong Kong. ``There is a feeling the supply concerns are not as great as before.''

Crude oil for November delivery was at $78.78 a barrel, down 24 cents, in after-hours electronic trading on the New York Mercantile Exchange at 12:56 p.m. in Singapore.

The contract fell $2.20, or 2.7 percent, to $79.02 yesterday, the lowest close since Sept. 11 and the biggest one- day decline since Aug. 16.

Futures climbed to a record $83.90 a barrel on Sept. 20, the highest since they were introduced in 1983, as the dollar fell, stockpiles declined and hurricanes threatened output in the Gulf of Mexico. The dollar has climbed 1.6 percent since reaching an all-time low of $1.4283 against the euro on Oct. 1.

The dollar ``is going to be a little bit of a bearish factor,'' said Chris Mennis, owner of oil broker New Wave Energy LLC in Aptos, California. ``The hurricane season is pretty much behind us'' and demand is softening, he said.

Brent, Inventories

Brent crude oil for November settlement was at $76.40 a barrel, down 18 cents, on the London-based ICE Futures Europe exchange at 12:38 p.m. Singapore time. The contract fell $2.32, or 2.9 percent, to $76.58 yesterday, the lowest since Sept. 14.

Crude oil stockpiles in the U.S., the world's largest consumer, probably gained 1.5 million barrels last week, based on the median estimate from a Bloomberg News survey of 11 analysts. Inventories held 321.8 million barrels on Sept. 28, 9.3 percent more than the five-year average for the period.

Refinery operating rates were probably unchanged at 87.5 percent of capacity last week, based on the survey. Refiners usually shut units for maintenance this time of year after the passing of peak summer gasoline demand.

BP Plc shut crude and coker units for repairs last week at its 260,000 barrel-a-day Carson, California, refinery, according to a person familiar with the plant's operations. The shutdowns, which began Oct. 4, are scheduled to last about three weeks.

October Storms

October is the busiest month of the North Atlantic hurricane season after September and August, according to U.S. National Hurricane Center records.

An area of low pressure in the Caribbean about 150 miles (240 kilometers) northeast of Belize City may strengthen to a tropical depression as it heads west or northwest in coming days, the center said in an advisory on its Web site. An aerial reconnaissance will be carried out later today if warranted, the center said.

``We're almost half way through October,'' New Wave's Mennis said. ``If we close below $78.40 to $78.50, then we're probably going to test $74 to $76.'' Oct. 9 (Bloomberg) --