Oil fell for a second day after Opec boosted output for the first time since July and US equities dropped on a report showing that retail sales unexpectedly weakened in April.
Crude oil for June delivery dropped as much as 76 cents, or 1.3 per cent, to $57.26 a barrel on the New York Mercantile Exchange, and traded at $57.52 at 1.57pm in Singapore. Yesterday, the contract fell 83 cents, or 1.4 per cent, to settle at $58.02 a barrel, the biggest decline since April 27th. Oil touched $60.08 on May 12th, the highest in six months.
Prices initially rose after an Energy Department report showed that US supplies dropped for the first time in 10 weeks. Analysts are predicting crude oil may fall to $50 a barrel, saying prices have risen too far from their 20-day moving average.
"Oil is facing pressure from a surprise increase in Opec supply and a downswing in the major indexes," said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. "The energy market may not be ready for $60 oil."
The Organization of Petroleum Exporting Countries increased oil production last month, exceeding the group's quota by 967,000 barrels a day.
The 11 members bound by targets implemented 77 per cent of planned output cuts of 4.2 million barrels a day, down from a revised 82 per cent for March, the Vienna-based organisation said in a monthly report yesterday.
Those 11 nations, which exclude Iraq, pumped 25.812 million barrels a day in April, the report said, citing secondary sources, which include estimates from analysts and news organisations. That compares with 25.587 million a day in March. The nations have a target of 24.845 million barrels a day that took effect from January 1st.
The 12-member group will take into consideration the recent increase in oil prices when it meets on May 28th to decide whether a cut in output is needed to support prices, said Shokri Ghanem, the chairman of Libya's National Oil Corp.
"The near-term risk for the oil price in the next couple of months is lower," Mr Moore said. "We might see oil prices at some point back under $50 a barrel."
Stock markets were also under pressure. Indexes fell in the US, the world's largest oil-consuming nation, after the Commerce Department said that purchases at stores fell 0.4 per cent.
The Standard & Poor's 500 Index declined 2.7 per cent to 883.92, while the Dow Jones Industrial Average dropped 2.2 per cent to 8,284.89. The MSCI Asia Pacific Index fell 2.7 per cent to 95.54 at 1.44pm in Tokyo, the biggest decline since March 30th.
Economists forecast that the Commerce Department report would show that retail sales were unchanged, according to the median of 67 projections in a Bloomberg News survey.
"The international macro data released last night was not supportive for the oil price, although the US EIA inventory data show a sharp fall in crude inventories," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.
Total US daily fuel demand averaged 18.2 million barrels in the four weeks ended May 8th, down 7.9 per cent from a year earlier, the Energy Department report showed.
Deliveries of petroleum products, a measure of consumption, averaged 19.1 million barrels a day from the beginning of the year through April, 4 per cent less than during the same period in 2008, according to a report yesterday from the industry- funded American Petroleum Institute. Fuel use was the lowest for the first four months of the year in 11 years.
Opec cut its 2009 demand forecast for the ninth straight month, saying consumption will contract by 1.57 million barrels a day this year, or 1.8 per cent, to 84.03 million barrels. That is 150,000 barrels lower than the April forecast.
US crude-oil supplies dropped 4.63 million barrels to 370.6 million in the week ended May 8th, the Energy Department said. Stockpiles were forecast to increase by 1 million barrels, according to the median of responses in a Bloomberg News survey.
The Energy Department's report showed gasoline inventories fell 4.15 million barrels to 208.3 million in the week ended May 8th. Analysts surveyed by Bloomberg News before the report were split over whether stockpiles of the motor fuel would rise or fall.
Gasoline futures for June delivery declined 1.02 cents, or 0.6 per cent, to $1.6786 a gallon in New York at 12.02pm Singapore time.
Brent crude oil for June settlement fell as much as 56 cents, or one per cent, to $56.78 a barrel on London's ICE Futures Europe exchange. It was at $56.85 a barrel at 1.48pm in Singapore.
Bloomberg