Crude Falls on Rising U.S. Reserves

Crude oil prices fell 2.6% on expectations that Wednesday’s industry report will show a sixth rise in seven weeks in U.S. gasoline supplies.

U.S. reserves of motor fuel are now about 6.9% above last year’s levels, leaving refining profits at about a quarter of year-ago levels. That’s outweighing concern the U.S. will disrupt Middle East supplies by attacking Iraq in its war on terrorism.

“Gasoline is the key,” said Orrin Middleton, an energy analyst at Barclays Capital in London. “Another rise in U.S. gasoline and the high stockpiles will outweigh fear of Iraq.”

Brent crude oil for April settlement fell 54 cents, or 2.6%, to $20.33 a barrel on the International Petroleum Exchange in London. Brent, the benchmark for two-thirds of the world’s oil, rose 5.8% last week on concern of bombing.

U.S. retail gasoline prices fell 0.9cent to $1.107 a gallon in the week ended Feb. 11, the Department of Energy said in its latest survey of 900 filling stations. The average U.S. price for regular gasoline was 36.9 cents, or 25%, lower than a year ago, the survey showed. Gasoline reached a 21/2-year low of $1.059 on Dec. 17.

The profit from processing three barrels of crude into two of gasoline and one of heating oil last week plunged 40%, or 70 cents, to $1.05 a barrel, down 72%.

Secretary of State Colin L. Powell said the U.S. is capable of striking unilaterally at Iraq in the fight against terrorism. Still, it would be more difficult to depose the Iraqi regime without support from the Europeans, Russians and Arabs in the region, Powell said on NBC’s “Meet the Press.”

Saudi and Syrian leaders said they wouldn’t support any attacks against Iraq, hindering U.S. efforts to build a coalition against Saddam Hussein. Saudi Crown Prince Abdullah said any attack on Iraq or Iran shouldn’t be contemplated because it would not serve the interests of America, the region or the world, the New York Times reported.

Concern that the U.S. may attack Iraq, the Middle East’s third-largest oil shipper, produced crude oil’s biggest rise in six weeks.

The U.S. market was closed for the Presidents Day holiday. The American Petroleum Institute will report oil inventories Wednesday and the Department of Energy releases its data Thursday.