Oil Falls Toward $69 After U.S. Fuel Stocks Rise

NEW YORK (Reuters) - Oil prices fell toward $69 a barrel on Wednesday after U.S. data showed fuel stocks surged last week in the world's biggest energy consumer, signaling a recovery in oil demand could take more time.

The Energy Information Administration reported gasoline stocks leapt 2.9 million barrels last week, nearly three times the build that analysts had expected.

Distillate stocks -- which include diesel and heating oil -- rose by 700,000 barrels, more than double the forecast 300,000-barrel build.

"The inventory numbers are wildly bearish," said Phil Flynn, analyst at PFGBest Research in Chicago.

"We still have major supply and demand issues," he added.

U.S. fuel stocks remain far above five-year averages, with gasoline 7 percent above average levels and distillates 30 percent above the norm, government data show.

U.S. crude for November delivery settled 1.9 percent lower, down $1.31 to $69.57 a barrel, after gaining in the two previous days. London Brent crude fell $1.36 to $67.20.

Oil has rebounded from an 11-week low of around $66 in late September.

On the bullish side, the EIA reported a decrease in U.S. crude stocks last week of 1 million barrels, bucking analyst expectations for a rise of 2.2 million barrels. It also said petroleum product demand has recovered by 5 percent since the same time week in 2008, near the height of the financial crisis.

DOLLAR STRENGTH

Oil prices fell as a strengthening dollar prompted less investment in crude, which tends to hold its value or rise when the greenback weakens, as it had in two previous days.

The dollar rose Wednesday, by 0.2 percent against a basket of currencies <.DXY>, emerging from a 10-day low yesterday against the euro and an eight-month low against the yen.

The dollar gained on optimism that third-quarter U.S. corporate earnings reports, which began Wednesday, will show signs of an economic rebound.