Oil prices tanked Wednesday, as a government report showed an unexpected rise in gasoline inventories last week.
June crude fell $2.33 to $72.28, erasing about three-quarters of the previous two session's 4% rally. Gasoline prices plummeted 9 cents, or 4%, to $2.09 a gallon.
According to the Energy Department, the amount of gasoline in U.S. storage rose by 2.1 million barrels last week, the first rise sinse late February. The gain reflected higher capacity utilization at U.S. refineries -- 88.8% in the latest week compared with 88.2% in the week prior.
Perhaps more importantly for energy markets, Wednesday's report showed that gasoline demand held steady last month; it typically rises as weather gets warmer. Some traders attributed the decrease to high pump prices and their attendant media coverage.
Crude inventories rose by 1.7 million barrels, the report showed. The gain lifted the overall amount of crude in storage to 346.7 million barrels, its highest level since May 1998.
Wednesday's inventory reports briefly diverted the market's attention from Iran, where an ongoing standoff over uranium enrichment has raised the specter of supply constrictions. Iran is OPEC's second-biggest oil producer.
reported Wednesday that the U.S., France and Britain are preparing a draft resolution that would demand Iran stop its enrichment program, which the West believes is a cover for weapons research. The U.N. Security Council is scheduled to take the matter up later this week.