Oil tumbles back to $60
April contract sinks nearly 3 percent after government reports crude inventories swelled to the highest in nearly seven years.
NEW YORK (CNNMoney.com) - Oil prices skidded Wednesday after a government report said crude inventories climbed beyond expectations to their highest level in nearly seven years.
U.S. light sweet crude for April delivery tumbled $1.56 to $60.02 a barrel in active trading on the New York Mercantile Exchange, a drop of about 2.5 percent. The contract had fallen further, dipping as low as $59.25 earlier in the session, according to Reuters.
Just before the Energy Information Administration (EIA) released its inventory report, the April contract was down 53 cents at $61.05. Crude prices fell 83 cents Tuesday.
Crude oil inventories climbed by 6.8 million barrels last week, the EIA said in its weekly report, versus forecasts for an increase of about 1.6 million barrels.
The increase, to 335.1 million barrels, brought crude oil stockpiles to the highest since late May 1999, and kept them well above average for this time of year.
Brian Kuzma, an energy analyst at the Houston-based firm RBC, said that in addition to the inventory news, OPEC's decision to keep production running near full tilt and waning fears about supplies from Iran weighed on prices Wednesday.
Prior to the EIA report, OPEC announced it will keep output at about 28 million barrels a day despite expectations of lower demand in the spring, according to Reuters.
On Tuesday, Iran said it would not halt domestic crude production even though it is not seeing eye-to-eye with the West on its nuclear plans. Iran is the world's fourth-largest oil exporter.
"The political risk factors don't appear as prevalent as previously thought," Kuzma told CNNMoney.com.
The EIA also reported crude imports over the past four weeks have averaged 10.1 million barrels a day, down 46,000 from the same four-week period a year ago.
Total motor gasoline inventories fell 1.1 million barrels last week, but remain above the upper end of the average range. Gasoline inventories were expected to fall 600,000 barrels last week, according to a Reuters survey.
Inventories of distillate fuel used in heating dropped by 2.7 million barrels last week, but remain well above the upper end of the average range for this time of year. The news service reported that distillates were expected to drop by 1.6 million barrels.
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