NEW YORK (CNN/Money) - Oil prices tumbled more than $3.50 a barrel Wednesday, the biggest drop in more than three years, after a government report showing inventory buildups helped ease fears of heating oil shortages ahead of winter.

Supplies of crude oil also came in higher than forecasts.

Light crude for January delivery sank $3.64 to $45.49 a barrel on the New York Mercantile Exchange, a drop of 7.4 percent and the biggest one-day decline since late September of 2001. In London, Brent crude sank $3.20 to $42.31 a barrel.

In its report, the federal government's Energy Information Administration (EIA) said supplies of distillate fuels, including heating oil, rose nearly 2 percent in the week ended Nov. 26.

Also pressuring prices: weather forecasts have called for mild temperatures through this week in the Northeast, the world's biggest heating oil market.

"This is the scenario traders have been waiting for [for] weeks," said Phil Flynn, an oil analyst with Alaron Trading. "With warmer temperatures predicted over the next six to 10 days, we may have turned the corner" on high oil prices, Flynn said.

"Mother Nature is going to be huge in the next several weeks," Kyle Cooper at Citigroup Global Markets told Reuters. "Long term I think we're headed to $30 to $35, but I don't think we're doing that yet. We have a lot of winter left."

Crude has fallen sharply since hitting a record trading high above $55 at the end of October.

Distillate stocks rose 2.3 million barrels to 117.9 million, the EIA said. Analysts polled by Reuters had forecast an increase of 1.4 million barrels.

Of that amount, heating oil, or high-sulfur distillate stocks, rose 1 million barrels. Crude oil inventories rose 900,000 barrels to 292.3 million barrels, beating analysts' forecasts by 200,000 barrels.

Gasoline inventories rose 3 million barrels, while analysts polled by Reuters were expecting a 1.1 million barrel rise.

The big drop in prices means traders are now betting that distillate stocks will keep rising for weeks to come, said Flynn at Alaron Trading. Those bets could prove risky, though, since heating oil supplies are still below their five-year average, he noted.

"Now we need continued warm weather to keep up this downward trend," said Flynn. "And we should look to OPEC now, too. They're getting whacked on the dollar, and the price of crude is falling. If they decide to cut production, we'll be right back at square one."