NEW YORK (CNNMoney.com) - Oil prices slid further Thursday, breaking below the $70 a barrel mark, a day after weekly inventory reports in the U.S. showed a surprise build in gas and oil supplies.

Light, sweet crude for June delivery on the New York Mercantile Exchange fell over 3 percent to settle at $69.94 a barrel, down $2.34, after falling as low as $69.30 just after noon ET. The decline follows a drop of over 3 percent Wednesday, when oil backed away from near-record highs after the stockpile report.

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"As prices go higher and higher, and more light is shined on the market, some of the hedge money moves to the side," said Mike Fitzpatrick, an energy analyst at Fimat in New York.

Perhaps also helping push prices lower is a proposed United Nations Security Council resolution on Iran, which does not immediately call for sanctions.

The U.N. debate on Iran remains in focus as the Security Council meets to discuss whether to impose sanctions on that country for its nuclear program.

The Security Council introduced a resolution Wednesday demanding that Iran halt enrichment.

The text does not contain any sanctions, punitive steps that China and Russia have opposed, but threatens "further measures" if Tehran does not comply.

The foreign ministers of Germany, the United States, Britain, France, Russia and China meet in New York early next week and there is a slight chance that the measure would be adopted before then. Tehran has said repeatedly it will not halt oil exports over the dispute, but would fight back if attacked.

Iran has refused to abide by a United Nations Security Council order to stop enriching uranium, which the country says is for peaceful power-generating purposes. Several nations, including the U.S., France and England, say the intent is to build a nuclear weapon.

The prospect of confrontation with the Iran, the world's fifth largest oil producer, has helped keep prices high.

In its weekly stockpile report, the Energy Information Administration said Wednesday that crude supplies rose by 1.7 million barrels, while closely watched gasoline inventories swelled by 2.1 million barrels. Analysts were looking for a 100,000 barrel decline in crude stores and a 700,000 barrel drop in gasoline supplies, according to Reuters.

Distillates, which are used to make diesel and heating fuel, fell by 1.1 million barrels. Analysts were looking for a 100,000 barrel decline.

Of equal importance this week was refinery production, which has been interrupted lately due to heavier-than-usual maintenance attributed to Hurricane Katrina.

EIA said refineries are now operating at 88.8 percent capacity, which is higher than analysts expected.

EIA also reported a strong build in blending stocks, which include the cleaner-burning ethanol. Gas prices are near record levels, partly on fears of an ethanol shortage as refiners switched to the corn-based additive from a chemical-based one suspected of causing cancer.

Oil prices, which hit an all-time trading high of $75.35 on April 21 and are nearing the inflation-adjusted record levels of around $80 a barrel set in the early 1980s, have ebbed and flowed over the last couple of weeks.

Last week they fell around five percent, helped down by a drop in U.S. gasoline stocks that was less than expected and various proposals from lawmakers to ease gas prices, including ones by President Bush to cease filling the Strategic Petroleum Reserve and temporarily ease clean air standards.

But prices shot up again earlier this week, fueled by big investment fund buying and a continuously tense geopolitical climate, which is able to move prices far more than in the past because Saudi Arabia is pumping at full capacity and unable to boost production in the event of a crisis.

Other geopolitical concerns include Nigeria, where one quarter of the country's high-quality crude is shut in due to clashes with militants, who operate in an oil-rich but impoverished area of the country and are demanding the oil wealth be spread more equitably.

And in Bolivia, the country's newly-elected left leaning president sent in troops to nationalize the country's oil and natural gas resources Monday.

Although Bolivia is a fairly minor player in the worldwide energy market and analysts don't expect it to be repeated elsewhere, they said it's part of a larger global trend for governments to demand more taxes and royalties from oil companies, which have posted record profits along with oil's record prices.

Although geopolitics garner the headlines, they are only one factor that has caused oil prices to triple over the last three years.

Big investment funds, chasing returns amid a lackluster Dow in 2005 and relatively low global interest rates, have invested heavily in all commodities.

And supply and demand remains a bedrock cause for price movement. Continued and growing oil use in the U.S. and a newfound thirst from China, India and other developing countries drives demand; the realization that new discoveries of large, high-quality, easily recoverable oil deposits are probably a thing of the past crimps supply.

-- from staff and wire reports

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