Oil below $86 as traders eye US crude supplies

By ALEX KENNEDY Associated Press Writer

SINGAPORE (AP) - Oil prices dropped below $86 a barrel Tuesday in Asia as traders anticipated another increase in U.S. crude supplies from a government report due later this week.

Benchmark crude for June delivery was down 38 cents to $85.81 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 4 cents to settle at $86.19 on Monday.

Oil touched an 18-month high of $87.15 a barrel Monday, and has jumped about 23 percent since February on investor expectations that a growing U.S. and global economy will boost demand.

But U.S. crude inventories have risen in recent weeks and likely gained another 1.5 million barrels last week, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Department's Energy Information Administration is scheduled to release last week's supply data Wednesday.

Investors are also concerned that higher prices for crude products such as gasoline will eventually undermine economic growth.

"Throughout this move higher, signs that the world economy is recovering have trumped everything else," Cameron Hanover said in a report. "The economy has so far ignored signs that higher oil prices are making it that much harder for the recovery to maintain its pace."

In other Nymex trading in June contracts, heating oil fell 0.34 cent to $2.342 a gallon, and gasoline slipped 1.55 cents to $2.420 a gallon. Natural gas was steady at $3.992 per 1,000 cubic feet.

In London, Brent crude was down 32 cents at $88.62 on the ICE futures exchange.