By Mark Shenk and Samantha Zee
July 24 (Bloomberg) -- Crude oil futures were little changed near their lowest in seven weeks after falling yesterday as a report showed that U.S. fuel stockpiles increased and consumption tumbled to the lowest in more than a year.
Gasoline supplies rose 2.85 million barrels last week, the Energy Department said. Stockpiles of distillate fuel, a category that includes heating oil and diesel, climbed 2.42 million barrels. U.S. fuel demand averaged 19.9 million barrels a day, the lowest since January 2007.
``The inventory and demand numbers make it clear that demand is being affected by high prices and the weak economy,'' said Kyle Cooper, an analyst at IAF Advisors in Houston. ``The 19.9 million barrel demand number is incredibly low and has to have the bulls worried.''
Crude oil for September delivery rose 2 cents to $124.46 a barrel at 9:04 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, oil dropped $3.98, or 3.1 percent, to settle at $124.44 a barrel, the lowest close since June 4. Futures have lost more than 5 percent this week.
Demand has declined for three straight weeks, the Energy Department report showed. U.S. fuel consumption averaged 20.3 million barrels a day in the past four weeks, down 2.1 percent from a year earlier, the department said.
Refineries operated at 87.1 percent of capacity last week, down 2.4 percentage points from the week before, according to the department. It was the lowest utilization rate since the week ended May 9.
Refineries were forecast to operate at 89.5 percent of capacity last week, unchanged from the week before, according to the median of analyst estimates in the Bloomberg survey.
Crude-oil inventories dropped 1.56 million barrels to 295.3 million. Stockpiles were forecast to decline 675,000 barrels, according to the survey results.
``Any bullish impact from the crude-oil drop has been offset by rising product inventories in the face of falling refinery utilization rates,'' said Bill O'Grady, director of fundamental futures research at Wachovia Securities in St. Louis. ``This is another sign that demand is being hammered. You've reached a price level where there's a demand response.''
Analysts were split over whether gasoline inventories rose or fell last week, the survey showed. Distillate supplies were forecast to climb 2.5 million barrels.
Gasoline for August delivery fell 11.26 cents, or 3.6 percent, to settle at $3.0344 a gallon in New York yesterday, the lowest close since May 2. Futures reached a record $3.631 a gallon on July 11.
Pump prices are following changes in futures. Regular gasoline, averaged nationwide, fell 1.3 cents to $4.042 a gallon, AAA, the nation's largest motorist organization, said yesterday on its Web site. Pump prices reached a record $4.114 a gallon on July 17.
Crude oil has tumbled 16 percent from a record $147.27 a barrel on July 11, as a stronger U.S. dollar limited the appeal of commodities as a hedge against inflation and high prices cut fuel consumption. Prices also fell the past two days because a hurricane moved away from oil platforms in the Gulf of Mexico.
Oil and other commodities may drop further and the dollar increase if the Federal Reserve boosts interest rates to curb inflation. Philadelphia Fed President Charles Plosser yesterday said higher mortgage costs and continued declines in house prices pose no bar to raising interest rates.
Policy makers must increase borrowing costs before inflation expectations become ``unhinged,'' Plosser said in an interview with Bloomberg Television.
The dollar traded at 107.97 yen at 6:13 a.m. in Tokyo, after rising 0.5 percent yesterday, when it reached 107.97, the highest since June 26. The U.S. currency was at $1.5687 per euro, after rising 0.5 percent yesterday and touching $1.5670, the strongest since July 9. The yen traded at 169.27 per euro after touching 169.96 euro, the weakest since the 15-nation currency's 1999 debut.
The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, gained 31 percent in the first half of the year as the U.S. currency retreated 8 percent. The index has fallen 8.8 percent this month as the dollar has stabilized.
Hurricane Dolly came ashore in southern Texas yesterday, where coastal residents sustained their first direct hit by a hurricane in almost a decade. Dolly packed winds of 100 miles (161 kilometers) per hour as its eye hit South Padre Island, about 35 miles northeast of Brownsville, at 1 p.m. local time, according to the U.S. National Hurricane Center.
Dolly is the season's first hurricane in the Gulf of Mexico, home to about a quarter of U.S. oil production. The storm has steered south of most rigs, which are off the East Texas and Louisiana shores.
Brent crude oil for September settlement dropped $4.26, or 3.3 percent, to close at $125.29 a barrel on London's ICE Futures Europe exchange yesterday, the lowest settlement since June 4.