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NEW YORK (CNN/Money) -
Oil prices tumbled below $57 after a government report showed crude stocks declined last week far less than expected, indicating import disruptions due to Hurricane Dennis were not as severe as thought.
Light sweet crude oil for August delivery fell 74 cents to $56.72 a barrel on the New York Mercantile Exchange.
Just before the Energy Information Administration released its report, the contract was trading up 64 cents at $58.10.
Crude supplies fell by 900,000 barrels in the week ending July 15, the EIA said in its weekly inventory report. This was far less than the forecast for a 3.7 million barrel decline, according to analysts surveyed by Reuters.
Traders expected that recent hurricanes in the Gulf of Mexico would have eroded crude inventory levels, but the slim decline showed that Hurricane Dennis and Tropical Storm Cindy had less of an impact on inventories than market participants had expected.
"(This report is a) little bit bearish in terms of expectations," Kyle Cooper, an energy analyst at Citigroup Global Markets, told Reuters.
Inventories have already dropped 4 percent from their six-year peak in mid-May as refiners run at nearly full throttle, but they remain in the upper half of their normal seasonal range.
Distillate stocks increased by 2.3 million barrels, the EIA said, more than the forecasted 1.7 million barrel increase.
The distillate results were also bearish for oil prices, as dealers have been more concerned with diesel and heating oil supplies because of unusually strong demand ahead of the winter heating season.
According to the report, distillates are in the upper half of the average range for this time of year, and most of the increase was seen in heating oil.
Also weighing on oil prices was news that refinery runs fell 3.4 percentage points to 92.8 percent of capacity last week, according to the EIA. Given the sharp drop off at refineries, supplies were in surprisingly good condition.
But gasoline inventories decreased by 1.3 million barrels last week, versus Reuters' forecast for a fall of 900,000 barrels.
"The gasoline data is bullish and right now gasoline futures are showing the highest gains. We'll see if that leads the market," Refco analyst Marshall Steeves told Reuters.
The front-month gasoline futures contract was up 2.3 cents to $1.6990 on the NYMEX.
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-- from staff and wire reports
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