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Oil falls as crude stocks swell
Supply reaches highest level in nearly 7 years, but distillates fall far more than expected, prices tumble.

NEW YORK ( - Oil prices sink after a government report Wednesday said crude stocks swelled but the inventory of distillates, used for heating oil and diesel fuel, fell sharply.

U.S. light crude for April delivery fell 90 cents to $62.20 a barrel on the New York Mercantile Exchange. Oil was down 45 cents just prior to the report.

The Energy Information Administration said supplies of crude oil rose by 4.8 million barrels last week, reaching a level not seen since May 1999. Analysts were looking for a gain of 2.7 million barrels, according to Reuters.

Stocks of distillates dropped by 3.9 million barrels, while gasoline supplies fell by 900,000 barrels. Analysts polled by Reuters estimated a 1.7 million barrel drop in distillates and a 1.3 million barrel decline in gasoline supplies.

Although supplies of refined products fell, they still remain well above their average levels for this time of year, the EIA said.

Dan Lippe, president of the Houston-based consultancy Petrol Worldwide, said crude stocks swelled so much because many refineries are closed, undergoing annual maintenance and getting ready to produce government-mandated diesel fuel with lower sulfur content.

"It's not a big build," said Lippe. "We're not seeing an inordinate amount of crude coming in." It's just not being run through the refineries.

He expects gasoline and crude prices to rise this summer as refineries, busy producing low-sulfur diesel, push gasoline to the back burner.

The drop in gasoline stocks has been the driving force behind the recent runup in oil and gasoline futures over the last few days as traders fear supplies will be pinched ahead of summer, which is a busy driving time in the U.S.

Crude prices have gained 5 percent since Monday, while gasoline futures hit a 5-month high Tuesday.

Also supporting prices has been continued tensions with Iran over its nuclear weapons program and attacks on oil facilities in Nigeria by rebels who want greater control of the country's oil industry.


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