Oil dropped from a nine-month high in New York as investors speculated that fuel demand may falter after a report showed crude stockpiles increased in the U.S., the world’s biggest consumer of the commodity.

Futures slipped as much as 0.5 percent, heading for the first decline in more than a week. U.S. supplies rose 3.55 million (APISCRUD) barrels, according to the American Petroleum Institute. An Energy Department report today may show inventories gained 1.35 million barrels to the highest level in almost five months and refinery utilization fell, according to a Bloomberg News survey of analysts. Oil has climbed amid tension with Iran, OPEC’s second-biggest crude producer, over its nuclear program.

“Oil and gas demand in the U.S. has been muted for some time,” said David Lennox, an analyst at Fat Prophets in Sydney. The increase in New York crude “from $90 to where it sits now is probably supply shock potential,” he said.

Crude for April delivery fell as much as 53 cents to $105.75 a barrel in electronic trading on the New York Mercantile Exchange and was at $105.80 at 12:06 p.m. Sydney time. The contract yesterday gained 3 cents to $106.28, the highest close since May 4. Prices are 8 percent higher in the past year.

Brent oil for April settlement slid 27 cents to $122.63 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $16.83. It reached a record of $27.88 on Oct. 14.

Fuel Supplies

Gasoline stockpiles rose 314,000 barrels last week, according to the industry-funded API. They are projected to increase 250,000 barrels in the Energy Department report, according to the median of 10 analyst estimates in the Bloomberg News survey. Distillate inventories, a category that includes diesel and heating oil, gained 630,000 barrels compared with a forecast for a 1.5 million barrel decline.

The survey also estimated that companies operated refineries at 83.5 percent of capacity in the seven days ended Feb. 17, down 0.5 percentage point from the prior week’s one- month high.

The Energy Department is scheduled to release its weekly report at 11 a.m. today in Washington, a day later than usual because the government and financial markets were closed for the Presidents’ Day holiday.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines and files the reports with the government for the report.

Oil advanced yesterday after officials from the International Atomic Energy Agency, sent to Iran to defuse tensions over the country’s nuclear program, were denied access to a military base. Talks “couldn’t finalize a way forward,” the IAEA’s chief inspector, Herman Nackaerts, told reporters in Vienna yesterday upon his return from Tehran.

Iran produced 3.5 million barrels of oil a day last month, according to analysts estimates compiled by Bloomberg. Saudi Arabia, the biggest member in the Organization of Petroleum Exporting Countries, had output of 9.7 million barrels a day.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net