Oil prices jumped almost $2 Wednesday after briefly dropping to nearly $60-a-barrel, while natural gas futures plunged to their lowest level since December 2002.

The 7 percent decline in natural gas futures reflects that "storage is at a record, and there's no demand," said Fimat USA broker Mike Fitzpatrick.

Domestic inventories of natural gas are high due to last year's mild winter, and prices are under additional pressure because of receding fears about possible hurricane-related supply disruptions in the Gulf of Mexico.

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Industry officials have said in recent weeks that homeowners who depend on natural gas for heat should see lower bills this winter, assuming normal temperatures.

A surge in U.S. gasoline supplies briefly sent crude-oil futures lower on Wednesday. But on the heels of a 20 percent decline in oil prices since mid-July, Fitzpatrick said there is technical resistance around the $60 a barrel level.

Another reason for the near-term floor underneath oil prices is that traders expect winter demand for home heating fuel to kick in before long. Traders are also cautious because some OPEC members have raised the prospect of trimming the cartel's output.

It already appears that the recent plunge in retail gasoline prices has prompted some U.S. refiners to cut back on their production of motor fuels, and some analysts believe Saudi Arabia and Kuwait are contemplating unofficial cuts to their production.

In its weekly petroleum report, the Energy Department's Energy Information Administration said domestic inventories of gasoline increased by 6.3 million barrels last week to 213.9 million barrels, or 9 percent above year ago levels.

That build in gasoline came despite a 1 percent decline in refiners' utilization of their full production capacity, according to the EIA report.

After falling as low as $60.10 a barrel, light sweet crude for November delivery rebounded to settle at $62.96 on the New York Mercantile Exchange, a gain of $1.95 for the day.

Nymex natural gas futures fell 32.5 cents to settle at $4.201 per 1,000 cubic feet, the lowest close since Dec. 3, 2002.

Nymex oil futures are down 20 percent since hitting an intraday record of $78.40 a barrel on July 14.

Analysts attribute the decline since then to multiple factors, including:

• weakening economic growth in the U.S.;

• rising worldwide inventories of crude oil;

• the lack of any hurricanes threatening Gulf of Mexico oil facilities; and

• easing geopolitical jitters.

The diplomatic standoff between Iran and the United Nations has been marked recently by a more conciliatory tone from both sides.

The Bush administration said Wednesday it was willing to defer seeking U.N. sanctions against Iran for a few weeks if there is a chance for a diplomatic resolution of a long-running dispute over Iran's nuclear programs.

The summer spike in prices was fueled in part by concerns that Iran, which defied the U.N.'s Aug. 31 deadline to stop enriching uranium, might disrupt oil supplies if sanctions are imposed.

The EIA report showed U.S. inventories of crude oil fell by 100,000 barrels to 324.8 million barrels, or 5 percent more than last year. Inventories of distillate grew by 2.6 million barrels to 151.3 million barrels, or 15 percent above year ago levels.

The EIA releases its next weekly natural gas supply report on Thursday.

In other Nymex trading, gasoline futures rose 4.81 cents to settle at $1.5399 a gallon, while heating oil futures climbed 5.63 cents to settle at $1.7141 a gallon.

In London, November Brent crude on London's ICE futures exchange rose 6 cents Wednesday to $60.18 a barrel.

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