Updated from 1:24 p.m. EDT
Oil prices dropped Wednesday after the U.S. government reported solid gains in both crude and distillate-fuel inventories for last week.
The August contract, which plunged more than $2 Tuesday, settled down another 94 cents to $57.26 a barrel on Nymex. Gasoline futures, which dropped 4 cents to $1.58 a gallon, have fallen more than 5% in the last two sessions.
The Energy Department said in its weekly inventory report that crude stocks rose by a surprising 1.1 million barrels; analysts expected a 1.4-million-barrel drop. Distillates, a group that includes diesel, heating oil and jet fuel, rose by 1.7 million barrels, roughly in line with expectations. Gasoline inventories rose by 300,000 barrels.Refineries operated at 96.3% utilization last week yielding 9.1 million gasoline barrels a day -- the second highest weekly average ever. Distillate demand growth declined from the prior week, but is still relatively robust, at 5.7% higher than a year ago. Jet fuel demand was 3.3% higher than the same time last year. "Supplies of both crude and gasoline are at very comfortable levels," says Jeff Mokychic, futures analyst at Bridgeton Global Investor Services. "Lower distillates were not enough of a concern to justify $60 oil." Still, says Mokychic, "another run to $60 is not impossible." Oil prices hit an all-time record high above $60 a barrel earlier this week, climbing about 35% since January. The rally stalled Tuesday when speculators began to take profits ahead of the quarter's end. "We probably saw a peak over $61 a barrel and I expect a correction to $55," says David Jesser, branch manager at the trading firm Alaron.com. "But it's still a bull market." At Banc of America, analysts warn investors from thinking that the rally is over. "Don't look down," analyst Dan Barcelo said in a research note. "Demand is holding in, and there are limited signs of a supply response. Until supply and spare capacity catch up with demand, we expect oil prices to trend well above mid-cycle conditions."