Oil prices fell to a New York Mercantile Exchange close of $98.23 after a government report showed that the United States' crude stocks rose more than expected last week.
The Energy Department's Energy Information Administration inventory report was mixed: While crude oil inventories rose by 4.2 million barrels last week, more than the 2.9 million barrel increase analysts surveyed by Dow Jones Newswires had expected, stocks of distillates, which include heating oil, fell by 4.5 million barrels, much more than the 1.5 million barrel forecast.
Traders chose to focus on the crude number. Many analysts believe rising supplies and the falling demand noted in a number of recent reports means oil prices will eventually fall.
But they've been wrong before. Indeed, prices have spiked in recent days on buying fueled in part by investors attracted to the oil market by the falling dollar. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
A battle over these differing points of view is playing out in the oil markets, fueling price volatility.
"There's just a lot of widely divergent opinions on the market right now," said Tim Evans, an analyst at Citigroup Inc. in New York.
Light, sweet crude for April delivery dropped $1.47 a barrel, or 1.47 percent, on the Nymex, after earlier alternating between gains and losses. March oil rose to a new settlement record of $100.74 and a new trading record of $101.32 before expiring Wednesday.
The Energy Department and many analysts expect retail gasoline prices to peak this spring well above last May's record of $3.227 a gallon (85 cents a liter). Estimates of how high prices will go range from $3.40 a gallon to nearly $4.
However, the EIA on Thursday also reported gasoline supplies rose by about 1 million barrels last week, in line with expectations. That brings gasoline inventories to a 14-year high, which could limit spring price increases.
Other energy futures were mixed Thursday. March heating oil futures fell 3.24 cents to $2.7222 a gallon, and March gasoline futures fell 7.52 cents to $2.51 a gallon.
March natural gas futures rose 1.8 cents to $8.983 per 1,000 cubic feet after the Energy Department, in a separate report, said inventories fell by 172 billion cubic feet last week, in line with expectations.
In London, April Brent crude futures fell $1.83 to $96.59 a barrel on the ICE Futures exchange.