NEW YORK – Oil prices dropped sharply Wednesday after a U.S. government report showed a surprise increase in the nation's gasoline stockpiles last week, triggering profit-taking by big money speculators.
U.S. light crude ended down $1.22 to $66.70 a barrel after hitting as high as $69 earlier in the day on the New York Mercantile Exchange on rising tensions over Iran. London Brent crude fell $1.02 to $64.97 a barrel.
The steep drop came after the U.S. Energy Information Administration reported a build in gasoline supplies in the world's largest energy consumer of 4.2 million barrels last week, nearly quadruple expectations.
"That was a shocking gasoline build," said Addison Armstrong, manager for exchange traded markets at TFS Energy.
The build in gasoline supplies erased a year-on-year stockpile deficit that had attracted heavy buying by funds, betting on a crunch in inventories in the run up to the U.S. summer driving season.
"There's been a lot of fund and local trader selling here after we hit $69 ... there's major profit-taking from the big funds and locals," said Scott Meyers, senior trading analyst at Pioneer Futures.
The EIA report also showed U.S. crude stocks climbed 1.9 million barrels, adding to a stockpile already 11 percent above last year's levels, and distillate supplies fell a modest 200,000 barrels.
"Eventually we'll turn around on geopolitical concerns about Iran, but as far as the inventories are concerned it's pretty bearish," said Marshall Steeves, analyst at Man Financial.
The market has been on edge for weeks over Iran's standoff with the West over its nuclear ambitions, fearing supply disruptions from the world's fourth-biggest oil exporter.
Iran's oil minister told reporters in Vienna Tuesday that it would not halt its exports, though Iranian President Mahmoud Ahmadinejad Wednesday insisted Tehran would not give up the right to a peaceful nuclear program.
The United States won agreement this week from a reluctant China and Russia to support taking the Iranian nuclear issue to the U.N. Security Council, a step that could ultimately lead to sanctions.
Separately, U.S. President George W. Bush said in a speech late Tuesday that America was addicted to oil and called for slashing its imports from the Middle East by more than 75 percent by 2025, a goal the government's top energy forecasting agency suggests will be almost impossible to meet.