Oil below $50 on bigger supply jump

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NEW YORK (CNNMoney.com) -- Oil prices fell Wednesday after a government report showed crude supplies rose more than double what was expected.

In its weekly inventory report, the Energy Information Administration said crude stocks rose 5.6 million barrels in the week ended April 10.

Analysts were expecting a much more modest increase of 2.5 million barrels, according to a consensus estimate compiled by Platts, an energy information provider.

Oil fell 16 cents to settle at $49.25 a barrel Wednesday. It was up 50 cents to $49.91 just prior to the report's release.

"The outlook for the overall economy is pretty down, and demand for oil continues to drop," said Rachel Ziemba, analyst at RGE Monitor.

Consumers have scaled back energy use on continued uncertainty about when the recession will reverse. That in turn has caused a glut in supply.

In response to growing stockpiles, the Organization of Petroleum Exporting Countries - whose members produce about 40% of the world's crude - has been pressured to put a floor under prices.

In a monthly report released Tuesday, OPEC said demand would drop by 1.37 million barrels per day in 2009, while its previous forecast was for demand to fall by 1.01 million per day. OPEC said it plans to meet May 28 to reassess the oil market.

Ziemba said she expects sinking demand in the U.S. and abroad will put even more downward pressure on oil prices over the next two weeks.

Gasoline: Stockpiles of gasoline fell by 900,000 barrels, while analysts predicted a decrease of 960,000 barrels.

The national average price for a gallon of regular unleaded gasoline increased to $2.051, up from the previous day's $2.05, according to survey results released Wednesday by motorist group AAA.

The average price of a gallon of gas is down $2.063, or 50.2%, from the record high price of $4.114 in July.

The EIA report also said distillates, which are used to make heating oil and diesel fuel, decreased by 1.2 million barrels. Analysts expected distillate supplies to fall by 1.1 million barrels.