Oil prices dip as U.S. supply increases

Oil prices fell Wednesday as a key government report showed U.S. petroleum supplies increased last week. Energy traders meanwhile continued to watch developments in Libya, where weeks of unrest showed no signs of easing.

Benchmark West Texas Intermediate crude for April delivery lost 64 cents to settle at $104.38 a barrel on the New York Mercantile Exchange. In London, Brent crude rose $2.88 to settle at $115.94 per barrel on the ICE Futures exchange.

The report from the Energy Department's Energy Information Administration showed crude oil supplies grew by 2.5 million barrels. That's about what analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected.

Gasoline supplies fell by 5.5 million barrels, almost twice the amount analysts forecast. Distillates, which include diesel and heating oil, shrank by 4 million barrels, also twice as much as analysts estimated. The nation's refineries operated at 82 percent of capacity, slightly above expectations.

PFGBest analyst Phil Flynn attributed the steep decline in gasoline supplies to refiners who were getting rid of winter blends as they switch to summer formulas intended to reduce smog.

[AAA reported Wednesday that the average price of a gallon of gasoline on Long Island was $3.758, up 1.2 cents from the day before and more than 85 cents above the price a year ago.]

Forces loyal to Libyan leader Moammar Gadhafi struck an oil pipeline and storage facility Wednesday as they attacked rebels in at least two major cities.

Flynn said oil prices showed little reaction to the news because much of the risk to Libyan supplies has been priced in. -- AP