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By Nesa Subrahmaniyan and Yuji Okada
May 30 (Bloomberg) -- Crude oil fell for a second day in New York after declining the most since March yesterday as record prices reduced demand for gasoline and jet fuel.
Oil prices have closed at all-time highs on 27 days this year, and motorists have curbed driving while airlines cut routes as costs increased. U.S. fuel demand declined 0.7 percent to 20.5 million barrels a day in the four weeks ended May 23 from a year ago, the Energy Department said yesterday.
``There's a definite change in consumer behavior worldwide because of current high prices,'' said Tetsu Emori, fund manager at Astmax Ltd. in Tokyo. ``That said, we have to get used to big fluctuations in the market and it could just move back up quickly on any headlines about supply disruptions.''
Crude oil for July delivery fell as much as 62 cents, or 0.5 percent, to $126 a barrel in after-hours trading on the New York Mercantile Exchange. It traded at $126.36 at 1:57 p.m. Singapore time.
Yesterday, the contract declined $4.41, or 3.4 percent, to settle at $126.62 a barrel, the lowest close since May 16. It was the biggest drop since March 31. Futures reached a record $135.09 May 22. Prices have more than doubled over the past year.
Brent crude oil for July settlement fell as much as 54 cents, or 0.4 percent to $126.47 a barrel on London's ICE Futures Europe exchange, and traded at $126.53 at 2:01 p.m. Singapore time. Yesterday, it declined $4.04, or 3.1 percent, to settle at $126.89 a barrel. The contract touched a record $135.14 on May 22.
U.S. crude oil inventories fell 8.88 million barrels to 311.6 million last week, the Energy Department reported yesterday. It was the biggest drop since Sept. 17, 2004, when Hurricane Ivan forced the closure of U.S. oil platforms in the Gulf of Mexico. The decline was caused by ``temporary delays'' in unloading tankers, the department said.
Gasoline Use Falls
Gasoline demand last week was 1.2 percent lower than the same week last year, the U.S. Energy Department report yesterday showed. Stockpiles fell 1.6 percent to 206.2 million barrels as refiners kept processing below year-earlier rates.
U.S. gasoline demand dropped 5.5 percent last week as prices at the pump reached records, according to MasterCard Inc., the second-biggest credit-card company.
Stockpiles of distillate fuels, which include heating oil and diesel, rose 1.64 million barrels, or 1.5 percent, to 109.4 million barrels, the Energy Department said. Heating oil stockpiles gained 2.9 percent to 23.1 million barrels, the fourth consecutive increase.
``There's a lot of demand destruction taking place,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``We are probably headed for $120 in the near term.''
Airlines Cut Flights
Airports in Pittsburgh and Cincinnati are among 120 where airlines reduced seating capacity by at least 10 percent in the past year, with more cuts likely to offset the 83 percent increase in the cost of jet fuel.
Delta Air Lines Inc. and US Airways Group Inc. are cutting flights to reduce record fuel costs. Pittsburgh, home to 12 Fortune 1000 companies, lost nonstop service to London, Paris, Frankfurt and 19 U.S. cities when US Airways pared flights this year.
Delta's Comair cut back by 10 percent in Cincinnati, the headquarters of Procter & Gamble Co., the world's largest consumer-products maker.
Indonesia, Taiwan, Sri Lanka and Pakistan have decided to raise fuel prices as the cost of subsidies mounts, and Malaysia plans to announce a revision to its subsidies today. India is also considering an increase in fuel prices.
Dollar's Rally
The dollar traded near a three-month high against the yen and was at its most in two weeks against the euro, diminishing oil's appeal as a hedge. The dollar advanced after the U.S. government said gross domestic product was stronger last quarter than initially estimated.
The rally started May 28 after Federal Reserve Bank of Dallas President Richard Fisher said the central bank will raise interest rates should consumers expect faster inflation.
The weakening dollar and higher global demand for raw materials have led to records this year for commodities including gold, corn, soybeans and rice.
The dollar traded at 105.34 yen at 1:00 p.m. in Singapore, after rising 0.8 percent yesterday and reaching the highest since Feb. 28. The U.S. currency traded at $1.5524 per euro, after gaining 0.8 percent yesterday and touching the strongest level since May 19.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net
Last Updated: May 30, 2008 02:18 EDT
