Crude oil dropped in New York as traders sold contracts to lock in gains after prices reached a seven-month high on 2 June 2009 when investors sought commodities as a hedge against inflation.

Crude oil for July delivery dropped as much as $0.57, or 0.8%, to $67.98 a barrel on the New York Mercantile Exchange. It was traded at $68.32 a barrel at 10.32am Singapore time. The contract declined $0.03 on 2 June to settle at $68.55 a barrel. Prices are up 53% so far this year.

Crude oil had gained late in trading on 2 June, paring losses earlier in the day, as the dollar dropped on the assumption that record US borrowing will undermine the currency.

Investors who made bets that prices will increase, or so-called long positions, sell their contracts to make gains. Crude surged 23% on 2 June to a high of $69.05 a barrel.

The euro gained for a fourth day versus the dollar, as the Russian Government said that emerging market leaders may discuss the idea of a supranational currency at a meeting this month. The dollar dropped 1.2% to $1.4329 per euro, earlier touching $1.4331, the weakest level since December 29, 2008.

The Department of Energy said that US fuel demand over the past four weeks averaged 18.3 million barrels a day. That’s down 11% from the same period last year.

On 14 May the International Energy Agency estimated that 2009 will see the biggest contraction in world oil use since 1981. A day earlier Opec slashed its outlook for 2009 demand for the ninth month straight.

US crude-oil stockpiles possibly fell 1.5 million barrels in the week ended 29 May from 363.1 million the previous week, according to the median of 15 estimates by analysts before an Energy Department report tomorrow.

Inventories are expected to have fallen as refiners lifted operations to meet demand during the summer driving season.

Stockpiles of gasoline probably rose 650,000 barrels from 203.4 million the previous week, in accordance with the survey. Supplies of distillate fuel, a category that comprises of diesel and heating oil, increased 900,000 barrels from 148.4 million.

Brent crude for July 2009 dropped as much as $0.44, or 0.7%, to $67.73 a barrel on London’s ICE Futures Europe exchange. It was traded at $68 a barrel at 10.40am in Singapore. On 2 June it increased $0.20, or 0.3%, to $68.17 a barrel, the highest settlement since 21 October 2008.