Updated from 1:46 p.m. EDT

Oil prices fell sharply for a second day Thursday, after a host of bearish supply and demand reports this week flashed sell signals across trading floors.

June crude closed down $1.91 at $48.54 a barrel on Nymex, falling out of its trading range of roughly $50 to $55 a barrel. The contract has lost about 7% since Tuesday's close. Gasoline futures dropped about 5 cents to $1.43 a gallon.

Falling oil prices triggered a selloff of major oil producers' shares. The Amex Oil Index fell 3.67%, led by a 4% decline in

Exxon Mobil

(XOM) - Get Report

.

Prices were pressured by Wednesday's government report showing crude inventories in the U.S. rose by 2.67 million barrels last week, nearly twice the expected rate. Gasoline inventories added 187,000 barrels, compared with expectations for a 900,000-barrel gain.

"We will probably be seeing a delayed reaction to rising inventories in the next 15 to 20 days as traders digest the builds. Prices are likely to hit $45 a barrel in the next month," said John Person of the National Futures Advisory Service, a consulting firm in Palm Beach, Fla.

Phil Flynn, senior market analyst at Alaron Trading, said that the "fear premium seems to have been removed from prices, and all the concerns about whether we will have enough oil before the driving season have disappeared." Still, Flynn warns from getting out the "bulls' obituaries" just yet.

Crude inventories, which have risen 12 of the last 13 weeks, are currently at their highest level in three years, at 329.7 million barrels. Demand, on the other hand, might be slackening.

While demand in the U.S. grew by a robust 2.4% in 2004, the Energy Department said in an outlook report Tuesday that demand growth should be just 1.7% in 2005 and 1.9% in 2006.

Growing supply vs. a slowdown in demand might look like the right formula for easing oil prices, but many analysts and economists believe supply and demand fundamentals are not the major force steering near-term prices. Speculative trading and concerns over uncertain spare capacities are.

The International Energy Agency, a private oil market watchdog, said Wednesday that demand growth from China, the U.S. and Europe are showing signs of a slowdown. According to the agency's report, OPEC crude supply rose by 480,000 barrels in April to 29.4 million barrels a day, led by increases in production from Iran, Saudi Arabia, UAE, Kuwait and Nigeria.

In the first quarter, however, Chinese demand grew by only 4.5%, compared with a 19.3% jump in the same period a year ago, the IEA said.

Natural gas prices also fell Thursday, recently trading down 15 cents at $6.53 per thousand cubic feet, which is about 16% lower than the all-time high of $7.80 reached on April 1.

The Energy Department released its weekly working gas in underground storage report Thursday, showing a build of 54 billion cubic feet, higher than the estimated 45-billion build. The total amount in storage reached 1,509 billion cubic feet, which is 217 billion more than in the same period a year ago.

In company news, shareholders of

Noble Energy

(NBL) - Get Report

and

Patina Oil & Gas

(POG)

approved the $3.4 billion merger agreed upon last year. The news prompted a rating upgrade from J.P. Morgan analyst Shannon Nome, who raised Noble to overweight from neutral, citing it as an "attractive entry point." Shares of Noble fell 1.68%, to $65.51, and Patina shares increased 0.20% to $39.25.

Repsol

TST Recommends

(REP)

, the Spanish oil and gas producer, said its first-quarter net income increased by 37%. The company earned 845 million euros, up from 618 million euros in the same period a year ago, driven by high crude oil prices and higher refining and marketing margins. On the downside, the company said there was a 5% appreciation of the euro against the dollar, an increase in price differentials between light and heavy crude oils, and a larger discount on sale prices in Argentina. Shares fell 58 cents, or 2.27%, to $25.01.

Shares of other major oil producers sagged in late-day trading.

ChevronTexaco

(CVX) - Get Report

dropped 2.81%;

ConocoPhillips

(COP) - Get Report

decreased 4.52%;

Royal Dutch/Shell

(RD)

fell 2.34%; and

BP

(BP) - Get Report

declined 2.26%.

Matrix Service

(MTRX) - Get Report

is shining through the red with a 13% jump in its shares earlier in the day. The provider of construction and maintenance services to the power and petroleum industries said it signed an agreement with Bechtel for the engineering and construction of three 160,000-cubic-meter liquefied natural gas tanks. Matrix will receive about $97 million from the deal. Shares were trading up 41 cents to $4.40.

The Philadelphia Oil Service Sector Index has come down 4.15% Thursday, led by a 4.47% drop in

National Oilwell Varco

(NOV) - Get Report

shares, and a 4.25% drop in

Schlumberger

(SLB) - Get Report

.