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By Bloomberg

Oil slid after the biggest two-day rally in more than a month amid speculation U.S. crude supplies increased further from a record and on signs that China’s economy is slowing.

Futures fell as much as 1.3 percent in New York. Crude stockpiles probably expanded by 4.75 million barrels for an 11th week through March 20, a Bloomberg News survey showed before a report from the Energy Information Administration on Wednesday. A preliminary manufacturing gauge for China, the second-largest oil consumer, dropped to the lowest in 11 months, according to HSBC Holdings Plc and Markit Economics.

Oil has slumped 12 percent from this year’s peak in February as U.S. crude inventories and output surged to the highest level in more than three decades. Front-month prices advanced 7.9 percent the past two days, the most since Feb. 13, as the dollar’s decline bolstered the investment appeal of commodities.

“That would be a strong stockpile build in the current scenario given the record levels,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “The market is shifting its focus to news on storage. There’s some sense that a supply-side response is now going to be forced by the inability to store increased production.”

West Texas Intermediate for May delivery lost as much as 61 cents to $46.84 a barrel in electronic trading on the New York Mercantile Exchange and was at $46.88 at 3 p.m. Sydney time. Total volume was about 50 percent below the 100-day average. Prices are down 12 percent this year.

U.S. Stockpiles

Brent for May settlement fell as much as 41 cents, or 0.7 percent, to $55.51 a barrel on the London-based ICE Futures Europe exchange. The contract climbed 60 cents to $55.92 on Monday. The European benchmark crude traded at a premium of $8.67 to WTI.

U.S. crude inventories have gained for 10 weeks to 458.5 million barrels, the highest in weekly data compiled by the Energy Department’s statistical arm since August 1982. Supplies at Cushing, Oklahoma, the delivery point for WTI contracts, was at 54.4 million barrels, also the most on record. The nation’s largest oil-storage hub has a capacity estimated by Genscape Inc. at about 70 million.

The preliminary Purchasing Managers’ Index for China was 49.2 for March, missing the median forecast of 50.5 in a Bloomberg survey and a drop from February’s 50.7. Readings below 50 indicate contraction.

China will account for 11 percent of global oil demand this year, compared with about 20 percent for the U.S., according to projections from the Paris-based International Energy Agency.

“The Chinese economy is continuing to exhibit signs of softness,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone.