Oil supplies swell; pump relief not seen

NEW YORK (CNNMoney.com) -- Supplies of crude oil continue to swell in the United States, but don't expect that to translate into lower gas prices any time soon, one expert says.

In its weekly inventory report, the Energy Information Administration said crude stocks ballooned by 5.1 million barrels last week. Analysts were looking for a gain of just 600,000 barrels, according to Reuters.

EIA said gasoline supplies rose by 1.4 million barrels. Analysts were looking for a drop of 900,000 barrels.

Distillates, used to make heating oil and diesel fuel, fell by 1.2 million barrels, in line with estimates.

"The last time there was this much crude was in 1999, when oil prices were $16 a barrel," said Tom Kloza, chief oil analyst with Oil Price Information Service, a publisher of industry reports.

The swelling stock pushed down the price of oil.

U.S. light crude for January delivery lost 93 cents to settle at $59.24 a barrel on the New York Mercantile Exchange. Oil traded up 3 cents just prior to the report's release.

But Kloza noted that retail gasoline prices have actually risen over the last month and now stand at a nationwide average of $2.23 a gallon, down from a 2006 high of $3.03 in August but up slightly from $2.19 earlier this month.

He said the recent rise is not a trend, and he expects gas prices to fluctuate by about 10 or 15 cents over the course of the winter before heading higher again this spring when demand picks up.

Crude oil has also been trading in a narrow band around the $60 mark for the past several weeks, having fallen more than 25 percent from highs reached in July.

Kloza said that even though crude supplies are high in the United States, prices are unlikely to come down because of investment demand.

Investors of all types have been pouring money into oil, and commodities in general, over the past couple of years, enticed by prospects of what they see as long-term limited supply unable to keep up with surging demand.

Possibly accounting for some of the build in U.S. crude stocks, the EIA report said refineries were operating at 87.1 percent capacity. It was the second week in a row that refineries have been operating below estimates.

Jim Quinn, a NYMEX floor analyst at A.G. Edwards, said refineries sometimes slow operations this time of year for seasonal maintenance and to avoid possibly paying taxes on extra product that may linger until the end of the year.

Kloza also noted that if refineries were to operate at 90 percent capacity, "there would simply be no room to store all the excess product."

"Right now, there is really no tight supply of crude, or gasoline either," he said.

Oil prices rose more than 2 percent Tuesday after severe weather at Alaska's port of Valdez halted crude oil shipments and forced companies to slash output by nearly two-thirds.

The U.S. Coast Guard said Tuesday the storm that whipped up high winds and large waves at the port was abating, but pipeline regulators warned that disruptions to tanker loadings could last through Thursday.

The drop in oil prices since July has worried OPEC members.

Kuwait's oil minister said on Wednesday that OPEC would cut its oil production again in December if prices deteriorate and added that he felt a $55-$60-a-barrel price range was satisfactory.

OPEC agreed in October to cut output by 1.2 million barrels per day from November on.

Although oil prices have fallen, stocks of oil majors, including BP (Charts), ExxonMobil (Charts), ConocoPhillips (Charts) Chevron (Charts) and Royal Dutch Shell (Charts), have stopped mirroring crude prices and have rebounded since mid-September as traders bet on rising oil prices and search for deals in a sector many see as undervalued.

--from staff and wire reports

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Oil's price collapse, more or less

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