Oil tumbled to a seven-month low Wednesday on speculation that U.S. crude stockpiles climbed to the highest level since 1990 and as the euro weakened on concern that the debt crisis will overwhelm Spain.

New York futures fell 3.2 percent and Brent oil traded in London dropped below $103 a barrel for the first time this year. An Energy Department report Thursday is projected to show that U.S. supplies rose 1 million barrels to 383.5 million last week, according to analysts surveyed by Bloomberg. The euro fell versus the dollar as Spain’s default risk increased.

“We’re looking at a build of another million barrels to a 22-year high,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Given how high inventories are and how weak the economy looks, no wonder we’re trading lower. We’re going to probably continue seeing dollar strength, which will keep the pressure on oil.”

Oil for July delivery fell $2.94 to $87.82 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 21. Prices have decreased 16 percent this month, heading for the biggest drop since December 2008.

Brent oil for July settlement declined $3.37, or 3.2 percent, to $103.31 a barrel on the London-based ICE Futures Europe exchange. The contract touched $102.97, the lowest level since Dec. 19.

Saudi Arabian Oil Minister Ali al-Naimi said on May 13 in Adelaide, Australia, that he wanted to see the Brent crude contract drop to $100 a barrel.

Price Floor

“Ali al-Naimi has said he wants Brent at $100 and we’re rapidly approaching that level,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It’s not necessarily a floor. We may overshoot to the downside, like we did to the upside earlier.”

U.S. crude inventories climbed in the previous nine reports from the Energy Department. Fuel supplies dropped and demand slipped 1.7 percent in last week’s report.

Gasoline stockpiles probably fell 1 million barrels last week, according to the median of 11 analyst estimates in the Bloomberg survey. Supplies of distillate fuel, a category that includes heating oil and diesel, are projected to be unchanged, the survey shows.

The American Petroleum Institute was to release separate inventory data Wednesday. The Energy Department is scheduled to release its report at 11 a.m. Thursday.

Euro Decline

The euro touched $1.2379, the lowest level against the dollar since July 1, 2010. A weaker euro and stronger dollar curb commodities’ appeal as an alternate investment. The Standard & Poor’s GSCI Index of 24 commodities decreased as much as 2.6 percent and touched the lowest level since Oct. 7.

“We’re looking at the same financial factors that have been moving the oil market,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “Equities are getting killed, the euro is getting killed and the pessimism about Europe only seems to deepen.”

Europe needs to take steps to help “debt sustainability,” Spanish Prime Minister Mariano Rajoy said Wednesday. Italy’s borrowing costs rose as the government sold 5.73 billion euros ($7.1 billion) of five- and 10-year debt, falling short of the maximum target of 6.25 billion euros.

Greek Vote

In Greece, a VPRC opinion poll for Epikaira magazine showed that anti-austerity party Syriza had the support of 30 percent of voters, compared with 26.5 percent for New Democracy, which backs the terms of a European Union bailout. Greece holds new elections on June 17.

“The situation in Greece is bad and Spain’s position is looking untenable,” said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield Massachusetts. Fundamentals of the oil market also are terrible, she said.

Economic confidence in the euro area declined in May to the lowest level since October 2009. An index of executive and consumer sentiment in the 17-nation euro area fell to 90.6 from a revised 92.9 in April, the European Commission in Brussels said Wednesday.

The drop in oil prices accelerated after a report showed the number of Americans signing contracts to buy previously owned homes fell in April by the most in a year. The index of pending home resales dropped 5.5 percent from the prior month, figures from the National Association of Realtors showed Wednesday in Washington.

Trade Flows

“We’re seeing a risk-off trade flow in all the markets mostly motivated by events in Europe,” Evans said. “The oil market has issues of its own including weak demand and ample production from a number of sources.”

U.S. crude output rose 90,000 barrels a day to 6.24 million in the week ended May 18, the highest level since February 1999, last week’s Energy Department report showed. Oil production in the Organization of Petroleum Exporting Countries climbed 305,000 barrels to 31.405 million barrels a day in April, the most since October 2008, according to a Bloomberg survey.

Electronic trading volume on the Nymex was 461,565 contracts as of 2:32 p.m. Volume totaled 452,296 contracts Tuesday, 19 percent below the three-month average. Open interest was 1.44 million.