WASHINGTON (AP) _ Oil prices fell by more than $1 a barrel Wednesday after the U.S. government released data showing healthy crude inventories and a surge in domestic supplies of distillate fuel, which includes diesel and heating oil.
The selling briefly took oil prices below $60 a barrel _ the level OPEC has hinted could initiate an output cut.
``It's a case of a self-fulfilling prophecy,'' said Alaron Trading Corp.'s Phil Flynn. ``OPEC's been dropping hints that it wants to defend $60 and the market is saying 'Okay, let's see you do it.'''
Even if the Organization of Petroleum Exporting Countries does not step in with a production cut, Flynn said he could see prices moderating once winter fuel demand kicks in or traders start ``bargain hunting.''
In its weekly report, the Energy Department said the nation's inventory of distillate grew by more than 4 million barrels, a sign that refiners are ramping up output of refined products that will be in greater demand in the coming months and therefore command higher prices than gasoline.
Crude oil futures have plummeted more than 20 percent over the past two months as worries have eased about supply threats and signs of economic weakness in the U.S. could point to softening energy demand.
Fall is traditionally the peak delivery season for the diesel-thirsty trucking industry, but Wall Street analysts have warned in recent weeks that shipping volumes are not robust. The U.S. airline industry has also retrenched in the face of decreasing passenger traffic, according to data maintained by the Air Transport Association.
The latest Energy Department data showed distillate fuel inventories growing by 4.1 million barrels last week to 148.7 million barrels, or more than 11 percent above year ago levels. Gasoline inventories increased by 600,000 barrels to 207.6 million barrels, or 6 percent above year ago levels.
Crude oil inventories declined by 2.8 million barrels to 324.9 million barrels _ but that's still 5 percent more than last year and well above the five-year average for this time of year.
Light sweet crude for October delivery on the New York Mercantile Exchange fell $1.20 to settle at $60.46 a barrel _ the lowest close since March 20.
November Brent on the ICE Futures Exchange fell $1.70 to settle at $60.47 a barrel.
In other Nymex trading, unleaded gasoline futures fell 3.67 cents to settle at $1.4671 a gallon, natural gas futures fell 7.5 cents to settle at $4.931 per 1,000 cubic feet and heating oil futures declined by 4.38 cents to settle at $1.6478 a gallon.