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NEW YORK (CNN/Money) -
Oil prices fell for the first time in over a week Thursday on a government report that showed rising energy inventories.
Light sweet crude for July delivery sank 97 cents to settle at $53.63 a barrel on the New York Mercantile Exchange, snapping a seven-session winning streak.
Prices had risen to a fresh five-week high of $55.40 in morning trading after the weekly report from the Energy Information Agency (EIA), then hovered near breakeven for much of the day.
"We were up on heating oil in the morning, but ended the day down closer to the levels some would expect given the data (on crude supplies)," said Jan Stuart, an analyst with Fimat USA.
In addition to rising inventories, the numbers showed growing demand for gasoline and distillates used to make heating oil.
Crude oil inventories rose by 1.4 million barrels last week, far more than the 250,000-barrel rise forecast by analysts polled by Briefing.com, to stand well above average for this time of year, the EIA said.
The surge in crude supplies dragged the July contract gave skeptical traders reason to sell following Wednesday's rally that took prices up by $2.63, or 5 percent.
Back and forth market
Oil prices see-sawed earlier in the day, turning higher despite the stronger-than-expected crude supply number. Many analysts attributed the late morning price hike to unseasonable heating oil demand.
Supplies of distillate fuel rose 700,000 barrels, versus forecasts for a 1.5 million barrel rise, and stockpiles remain in the lower half of the average range for this time of year, the EIA said. The report also noted a surprising drop in high-sulfur distillate fuel used for heating oil.
The heating oil contract rose after the report, up 1.18 cents to $1.5560 a gallon on the NYMEX, and ended the day off its highs at $1.54.
"Heating oil, along with jet fuel and diesel demand, is up and there's no sign of slowing," said Phil Flynn, an oil analyst at Alaron Trading.
Distillate fuel demand in general has averaged nearly 4.1 million barrels a day, or 5.2 percent above the same period last year, according to the EIA, while jet fuel demand is up 5.5 percent over the last four weeks compared to the same four-week period last year.
Analysts said the unusual rise in demand has helped push crude oil up 16 percent over the past two weeks. Heating oil jumped 9 cents a gallon, or 6.2 percent, Wednesday, and the crude contract posted its biggest one-day rise since Feb. 22.
Some analysts said that years of steadily rising oil prices and the assumption that they will only go up have pushed airlines and other end users to hedge, or buy oil far before it will be used, in a bid to lock in better prices.
"There has been a rising floor underneath oil prices," said Stuart, an analyst with Fimat USA. "Last year we were worried about $40 a barrel oil, and now $60 a barrel is the worry."
In gasoline, inventories rose more than forecast but are still near the upper end of the average range for this time of year, the EIA said.
Moreover, motor gasoline demand has averaged over 9.3 million barrels per day over the last four weeks, or 1.8 percent above the same period last year.
The announcement from the EIA came a day later than usual because federal government offices were closed Monday in observance of Memorial Day.
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