Crude oil futures fell in after-hours trading Tuesday after the American Petroleum Institute reported the first increase in U.S. inventories in three weeks.
Supplies rose 6.6 million barrels, or 2.3%, to 302.3 million barrels, the institute said in a weekly report. Analysts had been divided on whether the report would show supplies higher or lower. Last week's report showed the biggest decline in more than a year.
"Crude oil stockpiles have rallied back above year-ago levels," said Phil Flynn, vice president and senior market analyst at Alaron Trading Corp. in Chicago. The "surplus in crude signals that things might not be as tight we thought."
Crude oil for October delivery was down 39 cents at $28.38 a barrel in evening trading on the New York Mercantile Exchange.
The September crude contract reached an 18-month high of $30.11 a barrel before it expired at the end of the regular trading session Tuesday.
Oil prices have strengthened steadily on fears of potential supply disruption in the Middle East, home to two-thirds of world oil reserves, as Washington considers military action to oust Iraqi leader Saddam Hussein.
The Organization of the Petroleum Exporting Countries has held its official production at the lowest level for a decade this year, helping to push crude prices up almost 50% despite sluggish fuel demand.
The increase in inventories reported by the API was the biggest since the week ended April 26. Most of the rise, 5.3 million barrels, occurred on the U.S. Gulf Coast, the nation's refining and importing heartland. The drop of 9.5 million barrels reported last week was the biggest decline since June 2001 and included a drop of 6.1 million barrels in the Gulf region.
Some analysts who were surprised by the size of last week's stockpile plunge expected a correspondingly large rise this week.
The API also reported that inventories of gasoline rose unexpectedly, increasing by 935,000 barrels to 209.9 million barrels. Analysts had forecast a decline of 800,000 to 1.3 million barrels. Supplies were up 3.4% from a year earlier.
Gasoline futures for September delivery were down 1.23 cents at 78.8 cents a gallon in after-hours trading in New York.