Oil falls as gasoline demand slows

NEW YORK (CNNMoney.com) -- Oil prices fell Wednesday after the government said growth in gasoline demand eased, refineries ramped up production and inventories were in line with estimates.

U.S. light crude for June delivery fell 72 cents to settle $63.68 a barrel on the New York Mercantile Exchange. Oil had traded down 36 cents just prior to the report's release.

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In its weekly inventory report, the Energy Information Administration said gasoline demand over the last four weeks grew at 1.6 percent, which is about the average rate.

Oil and gasoline prices had gained over the last few weeks, partly because gasoline demand growth was averaging closer to 2.5 percent.

EIA also said refineries operated at over 88 percent capacity. The number is still low, but is half a percent higher than the week prior.

An unusual amount of refinery fires and other accidents over the last couple of months has hampered gasoline production, and also helped push up prices.

The average retail price for gasoline nationwide is $2.98 for a gallon of regular, about 8 cents below the all time high, according to the motorist organization AAA.

In inventories, gasoline supplies, closely watched ahead of the summer driving season, fell by 1.1 million barrels. Analysts were looking for a decline of 1 million barrels, according to Reuters.

Crude stocks rose by 1.1 million barrels last week, while distillates, used to make heating oil and diesel fuel, fell by 200,000 barrels. Analysts were looking for crude supplies to grow by 1 million barrels and distillates to rise by 400,000.

Crude prices have traded in a wide band for the last year, hitting an all time non-inflation adjusted trading high of $78.40 last July, then briefly falling below $50 a barrel at the start of the year.

Diplomatic sparring with Iran, violence following elections in Nigeria, and the coming summer driving season have propped prices back to the mid $60s range, where they have traded for the last couple of weeks.

Stocks of big oil companies, including BP (Charts), Exxon Mobil (Charts, Fortune 500), ConocoPhillips (Charts, Fortune 500), Chevron (Charts, Fortune 500) and Royal Dutch Shell (Charts) have rebounded along with oil prices, with the AMEX oil and gas index up about 10 percent for the year.