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Gas Crunch Special report:
Gas Crunch +Full coverage
Oil moves down on healthy inventory data
Crude prices fall below $67 after EIA report shows surge in oil, gasoline stocks; Iran supply worries offer support.
By David Ellis, CNNMoney.com staff writer

NEW YORK (CNN/Money) - Oil prices turned down Wednesday on a government report that showed both crude and gasoline inventories climbed last week.

U.S. light sweet crude for March delivery settled down $1.36 to $66.56 a barrel on the New York Mercantile Exchange. Just before the Energy Information Administration (EIA) released its inventory report, the contract was down 2 cents at $67.90.

Crude oil inventories climbed by 1.9 barrels in the week ended Jan. 27, versus forecasts for an increase of about 1.3 million barrels. At 321 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year.

Weighing on prices earlier in the session was an agreement by OPEC producers in Vienna on Tuesday to maintain their output at 28 million barrels a day, although supply fears in producer countries such as Iran offered support.

Traders worry that Iran may retaliate against the West for trying to squash its nuclear program by cutting its oil output.

While the restart of production by some oil firms in Nigeria has allayed some supply fears, Russia reported a drop in output of 180,000 barrels per day in January due to severely cold weather in Siberia, Reuters reported Tuesday.

"We're at that point where seemingly unrelated things all mean the same thing to the crude market," Dan Lippe, the president of the Houston-based energy firm Petral Worldwide told CNNMoney.com. "Any little thing is treated as bullish – no news is just a brief respite from bullish news."

In his State of the Union speech Tuesday night, President Bush said that he wanted to break America's "addiction" to oil and instead move toward ethanol and other alternative fuels.

His plan which would slash Middle East imports by 75 percent by the year 2025.

The EIA report also showed that total motor gasoline inventories jumped by 4.2 million barrels last week, putting them at the upper end of the average range. Gasoline inventories were expected to climb by 1.1 million barrels last week, according to a Reuters survey.

Distillate fuel inventories inched lower by 200,000 barrels last week, but remain above the upper end of the average range for this time of year. The news service reported that and distillates were expected to rise by a half million barrels.

The total demand for products has slipped over the past four weeks as well, with total demand down 0.8 percent compared to the same period last year at 20.41 million barrels, according to the EIA report.

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