Oil prices briefly dipped below $53 a barrel Wednesday as the U.S. government reported a large increase in crude inventories and traders considered OPEC's conviction that the world's petroleum supply is adequate to meet demand.
But after dropping as low as $52.50 a barrel, light, sweet crude futures recovered to settle at $53.99 a barrel on the New York Mercantile Exchange (search), a decline of 24 cents. Prices are more than $3 below the intraday Nymex peak of $57.60 set on March 17.
Brent crude futures fell 94 cents to $52.09 a barrel on the International Petroleum Exchange in London.
The Energy Department (search) said in its weekly petroleum supply report that the nation's inventory of crude oil grew by 5.4 million barrels last week to 314.7 million barrels, or 9 percent above year ago levels.
U.S. gasoline inventories (search) fell by 2.9 million barrels last week to 214.4 million barrels, or 6 percent above year ago levels, the agency said. The supply of distillate fuel, which includes diesel and heating oil, dropped by 1.1 million barrels to 103.4 million barrels, or 2 percent below last year's level.
Gasoline futures rose 2.31 cents to $1.5961 per gallon, while heating oil futures climbed 5.03 cents to $1.606 per gallon.
"We're at a key (price) level," said Carl Larry, an analyst at Barclays Capital in New York.
"We're waiting to see if demand increases and how much it increases, especially for gasoline," Larry said. "If demand stays high, can refiners turn enough of this crude into gasoline? That's key."
Nationwide, the average retail price of gasoline is $2.15 a gallon, nearly 40 cents higher than a year ago.
The U.S. government's latest supply snapshot showed that refineries were running at 91 percent of their output capacity and that imports of crude have averaged 10.2 million barrels a day over the past month, compared with 9.9 million barrels a year earlier.
In the latest signal that OPEC (search) considered the market under control, Qatar's oil minister, Abdullah bin Hamad Al Attiyah, said there were no supply problems and that he did not expect the group to meet before June, as scheduled.
On Tuesday, OPEC President Sheik Ahmed Fahd al Ahmed Al Sabah, who is also the oil minister of Kuwait, said the group would be watching oil prices to determine whether another production increase is necessary.
"The comments from OPEC have put a cap on any upward price movements," said energy analyst Daniel Hynes of ANZ Bank in Melbourne, Australia.
OPEC agreed earlier this month to raise production quotas by 500,000 barrels per day and said it would consult on whether to increase them by a further 500,000 if prices continued to rise.
Worldwide demand is forecast by the International Energy Agency (search) to rise 2.2 percent this year to an average of 84.3 million barrels a day.
While oil prices are roughly 47 percent higher than a year ago, Nymex futures would need to surpass $90 a barrel to approach the inflation-adjusted high set in 1980.