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| Playing oil stocks
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Earnings could fall dramatically if rising prices lead to reduced demand -- here's a way to cope. (Full story)
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| Prices, where to from here?
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NEW YORK (CNN/Money) -
Oil prices fell Wednesday after President Bush renewed his call for oil companies to build more refineries and said he is going to work Congress to pass a bill making it easier to them to do so.
U.S. light crude for December delivery tumbled $1.79 to $60.65 a barrel on the New York Mercantile exchange, a drop of 2.9 percent.
Profit-taking in some refined products, especially heating oil, also helped push prices lower.
"We need more supply of gasoline for the sake of our consumers and for the sake of our economy," Bush said during an address to the Economic Club of Washington, Reuters reported.
"I'm going to work with Congress to pass a bill that makes it easier for current refineries to expand and encourages the construction of new refineries," the news agency quoted him as saying.
Oil prices traded lower most of the session but moved off their lows after a government report showed supplies of distillates dropped far more than expected last week but the overall crude stockpile was more than twice the forecast.
The Energy Information Administration said supplies of distillates -- which include diesel fuel and heating oil -- fell 1.6 million barrels for the week ending October 21. Analysts had predicted a drop of 800,000 barrels, according to Reuters.
Crude stocks, which have benefited from rising imports and a drop in refining capacity, surged 4.4 million barrels. Analysts had predicted a 1.9 million barrel increase.
"It's not necessarily a good thing to have a build in crude," said Phil Flynn, a senior market analyst at Alaron trading in Chicago. "It means refineries did not get up and running as quickly as hoped. It's a disturbing trend heading into winter."
Heating oil alone fell by 900,000 barrels to 55 million barrels. Despite the fall, stocks were over 4 million barrels higher than this time last year.
Wednesday's report comes after Tuesday's surge of $2.12. or 3.5 percent, as a cold wave swept into the Northeast and brought concerns over heating fuel supplies into focus.
Demand continued to run below last year's levels, with demand for gasoline down two percent, distillate demand down 1.4 percent and demand for jet fuel down 4.9 percent.
Analysts were watching Wednesday's report for signs that demand in the U.S., the world's largest energy consumer, is easing.
While a drop in demand could cause prices to fall, it could also signal a slowing economy.
Refined products including heating fuel, diesel and gasoline have been watched closely in the aftermath of Hurricanes Katrina and Rita.
The storms closed several refineries along the Gulf Coast last month and resulted in a 25 percent loss of refining capacity, according to Reuters.
The storm season, already the most active on record, runs to the end of November. Conditions were favorable for the slow development of another storm in the southwest Caribbean, the U.S. National Hurricane Center said Wednesday.
Four U.S. oil refineries remained completely shut Wednesday, accounting for 1.03 million barrels per day of fuel production, or 6 percent of the nation's capacity, Reuters reported.
Oil price have come down almost $10 since August 31, when crude reached a record trading high of $70.85 immediately after Hurricane Katrina.
But supply fears have kept oil above $60 since then, and some economists fear high energy prices will soon result in increased inflation, a slowing economy, or both.
-- from staff and wire reports
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Fuel prices start to weigh on consumers. Click here.
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