U.S. oil prices dropped more than $2 a barrel amid easing concerns over Nigerian crude shipments and a slew of U.S. refinery restarts that signaled a recovery in gasoline supplies ahead of summer.
U.S. crude fell $2.05 or 3.1% to $63.15, after trading in a range from $65.24 to $62.54. Tuesday's decline was the biggest since April 9th. London Brent crude settled down $1.58 or 2% at $68.13, well down from a session high of $70.24.
June RBOB gasoline sank 10.58 cents or 4.4% to settle at $2.2979 after swinging from a morning high of $2.4225 to a low of $2.2288 just before the end of open-outcry trading.
Heating oil posted its biggest decline in 3 1/2 months. The June contracts on the New York Mercantile exchange fell 7.01 cents or 3.6% to $1.8690.
Crude prices had already fallen almost a dollar Monday after Nigerian unions suspended a strike that had threatened to halt oil shipments from the world's eighth-largest oil exporter. Militant attacks on Nigeria's oil installations have already reduced the OPEC member's output by around a quarter.
The country's new president Umaru Yar'Adua, who took office today, said he would urgently address the crisis in the oil-producing Niger Delta.
"Much of this selling appears to be related to a huge evaporation of geopolitical concerns, mostly surrounding Nigeria," said Jim Ritterbusch, president of Ritterbusch and Associates. "The unrest people had anticipated in the wake of the (Nigerian) elections never developed, and the new president is taking steps to ease problems in the Niger Delta."
Adding to oil's losses, some five U.S. refineries in Texas, Louisiana, and Delaware were resuming normal operations after repair work, signaling rising domestic production of gasoline at the start of the summer driving season.
"The funds have started liquidating the gasoline longs en masse," Ritterbusch said.
Refinery problems since winter have sliced deeply into the country's fuel stockpiles, and supplies remain about 7% below a year ago, according to the Department of Energy.
A preliminary Reuters poll today, however, showed that analysts expect gasoline supplies rose last week by 1.2 million barrels -- the fourth consecutive weekly build -- as refineries boosted production ahead of the Memorial Day holiday.
The next snapshot of U.S. gasoline supplies is Thursday, when the United States Energy Information Administration publishes weekly inventory data.
Oil had hit $71.80 a barrel last Thursday, its highest since August 28, 2006, propelled by the Nigerian supply problems and low supplies of U.S. gasoline.
Last July, U.S. oil prices hit a record high of almost $79 a barrel, due to the war between Israel and Hizbollah in Lebanon that raised Middle East tensions, and booming economic growth in emerging countries such as China, the world's second-largest oil consumer.