WASHINGTON – Crude oil futures (search) prices fell Wednesday after the U.S. government reported sizable increases in gasoline and heating oil inventories.
Light sweet crude for February delivery dipped 63 cents to $43.28 per barrel in morning trade on the New York Mercantile Exchange (search). Brent crude was down 42 cents at $40.62 a barrel on London's International Petroleum Exchange.
The Energy Department (search) reported Wednesday that supplies of distillate fuel, which include heating oil and diesel grew by 2 million barrels last week to 121.1 million barrels. It was a sharply higher increase than was expected, though it still leaves inventories 11 percent below year ago levels.
High-sulfur distillates used for heating oil increased by 1.2 million barrels to 50.1 million barrels, about 9 percent below year ago levels.
The tight-but-growing supply of heating oil comes as winter weather in the U.S. Northeast, the main consuming region, has not been as cold as originally feared.
"That's a very bearish report," said Ed Silliere, vice president at Energy Merchant Corp. in New York. "It's pretty conclusive."
That said, concerns about possible supply disruptions in Iraq and terrorist activity in Saudi Arabia, the world's top supplier of crude oil, have kept the market on edge, Silliere said.
U.S. gasoline supplies grew last week by 2 million barrels, while crude oil inventories shrank by 3.3 million barrels. However, there is more crude and gasoline today than there was a year ago.
Kurt Barrow of Purvin & Gertz, an energy consulting firm in Singapore, said milder weather in the United States will keep prices low for at least another week.
Markets were roiled in 2004 due to stronger-than-expected demand and persistent supply fears and unrest in key producers Saudi Arabia, Russia, Venezuela, Nigeria and Iraq.
Iraq's northern exports through Turkey were halted last month following sabotage on the Kirkuk-Ceyhan pipeline (search), which can carry up to 500,000 barrels per day. Prices spiked last week on fears of attacks on oil production infrastructure by Islamic militants in Saudi Arabia and elsewhere.
U.S. producers are also working to restore production in the Gulf of Mexico that was suspended ahead of the arrival of Hurricane Ivan in September. A gas leak in November also disrupted Norwegian production in the North Sea.
Although about $12 per barrel lower than record high prices set in late October, the price of crude remains nearly 30 percent higher than a year ago.