Oil falls after inventory report

Supplies of crude oil, gasoline in-line with estimates; fail to turn around stock market-induced decline.

February 28 2007: 11:00 AM EST

NEW YORK (CNNMoney.com) -- Oil prices fell Wednesday, remaining lower in the wake of tumbling stock markets, after the government reported supplies of crude oil and gasoline that were close to analysts' estimates.

U.S. light crude for April delivery slipped 74 cents to $60.72 a barrel on the New York Mercantile Exchange. Oil traded down 59 cents just prior to the report's release.

NYMEX crude prices (blue) verses shares in the AMEX oil and gas index (yellow) over the last three months.

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In its weekly inventory report, the Energy Information Administration said crude stocks rose by 1.4 million barrels last week. Analysts were looking for a gain of 1.9 million barrels, according to Reuters.

Distillates, used to make heating oil and diesel fuel, fell by 3.8 million barrels while gasoline supplies fell by 1.9 million barrels. Analysts were looking for a 2.8 million barrel decline in distillates supplies and a 1.8 million barrel fall in gasoline stockpiles.

The larger-than-expected fall in distillates was less of a concern for traders, as winter nears and end and focus shifts to the summer driving season.

EIA reported that all three products are still at above average levels for this time of year.

Crude prices have traded in a wide band for the last year, hitting an all time non-inflation adjusted trading high of $78.40 last July, then briefly falling below $50 a barrel at the start of 2007.

Diplomatic sparring with Iran and the coming summer driving season have propped prices back to the $60 a barrel range, where they have traded for over a week.

Oil prices had slipped Tuesday and in early trading Wednesday after a steep fall in the Chinese stock market Tuesday sparked fears of a slowdown in the oil-thirsty nation.

The Chinese selloff triggered big losses in exchanges around the globe, further compounding the worries.

A downward revision Wednesday to U.S. economic growth didn't ease fears of a slowdown.

Also depressing prices Wednesday: the contract for refined products like gasoline and heating fuel expires, forcing owners to either take delivery or sell.

But tensions with Iran over its nuclear program, and a general belief that the stock market slides are a brief, panic-induced blip and not a sign of looming economic trouble, limited oil's decline.

China markets rebounded 4 percent Wednesday, and U.S. stocks rose about 1 percent in early trading.

Stocks of big oil companies, including BP (Charts), Exxon Mobil (Charts), ConocoPhillips (Charts), Chevron (Charts) and Royal Dutch Shell (Charts) have rebounded along with oil prices, with the AMEX oil and gas index now trading about even for the year.