Oil Prices Fall on Increase in Inventories

By GILLIAN WONG

Oil futures fell Wednesday morning after the U.S. government released data showing an increase in crude oil and gasoline inventories, but traded near $62 a barrel on concerns that supplies of heating oil and natural gas would be stretched thin this winter.

Light, sweet crude for December delivery fell 24 cents to $62.20 a barrel on the New York Mercantile Exchange. In London, Brent crude futures on the International Petroleum Exchange slipped 31 cents to $59.93 a barrel.

Oil prices are more than 10 percent below the late August peak above $70 a barrel and some traders saw this as a buying opportunity on Tuesday, when crude futures climbed by more than $2 as a wave of colder weather arrived in the U.S. Northeast and Midwest.

"In my view, prices had probably gone down too far, especially with peak demand winter season looming," said commodity strategist David Thurtell of the Commonwealth Bank of Australia in Sydney.

But the latest weekly report from the U.S. Energy Department put a stop to Tuesday’s upward momentum – at least temporarily.

The agency said domestic crude-oil inventories grew by 4.4 million barrels last week to 316.4 million barrels, or 12 percent above year-ago levels. Gasoline inventories increased by 200,000 barrels to 195.9 million barrels, or 4 percent lower than last year. The nation’s supply of distillate fuel, which includes heating oil and diesel, shrank by 1.6 million barrels to 121.1 million barrels, or about 1 percent higher than last year.

Heating oil futures declined by about a penny to $1.88 a gallon, while gasoline futures dropped by more than 2 cents to $1.63 a gallon.

In a sign of the market’s particular unease about natural gas supplies, which have been strained by the loss of production following hurricanes Katrina and Rita, Nymex natural gas futures rose nearly 7.20 cents to $14.41 per 1,000 cubic feet, gaining on its record settlement of $14.338.

The U.S. Minerals Management Service said Tuesday 69 percent of daily oil production and 56 percent of daily natural gas production remains off-line in the aftermath of the hurricanes.

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AP Business Writer Brad Foss in Washington contributed to this report.