Oil Falls From Six-Month High as Global Supplies to Increase

(Bloomberg) -- Crude oil fell from a six-month high on speculation last week’s 10 percent advance won’t be sustained as global output increases.

Exports from Iraq’s Kurdistan region will begin June 1 after the state oil ministry agreed to “expedite” shipments, the provincial government said on its Web site yesterday. Venezuela, OPEC’s fifth-largest producer, seized the assets of 60 oil-field service companies on May 8 to restore operations shut over contract disputes.

“At some point you do have to be asking the question as to just how far this can go,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “The supply side really isn’t the focus of the market at the moment.”

Crude oil for June delivery fell as much as 68 cents, or 1.2 percent, to $57.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $57.99 at 11:58 a.m. in Singapore.

The contract rose 3.4 percent to $58.63 a barrel on May 8, the highest settlement since Nov. 11, as slowing job losses in the U.S. increased investor confidence and a drop in the dollar boosted the appeal of commodity investments.

Brent crude oil for June settlement declined as much as 54 cents, or 0.9 percent, to $57.60 a barrel on London’s ICE Futures Europe exchange.

U.S. Economy

Last week’s jobs report in the U.S., the world’s largest oil consumer, added to investor confidence that the worst of the recession there may be over, boosting demand expectations, Hassall said.

Ongoing weakness in the dollar will support commodities and oil may resume its rally if U.S. summer fuel demand is sufficient to start drawing down stockpiles there, he said.

Today, the euro has surged to a six-week high against the dollar as the gains in global equities has increased investors’ risk appetite.

Hedge-fund managers and other large speculators changed their bets on the direction of oil prices for a second time last week, according to U.S. Commodity Futures Trading Commission data.

Speculative short positions, or bets prices will fall, outnumbered long positions by 11,285 contracts on the New York Mercantile Exchange on May 5, the commission said May 8. A week earlier, traders had bet on rising prices.

New York oil futures plunged to a four-year low of $32.40 on Dec. 19 as global recession slashed demand and producers cut production to slow rising stockpiles. Prices have gained 39 percent in the past two months as measures to restore global credit markets lifted global equity markets.

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