Oil price heads lower with supply of crude on the rise

Oil prices fell sharply Thursday for a second straight day as growing supplies of crude, gasoline and heating oil exposed how badly the U.S. recession has cut into energy demand.

Benchmark crude for November delivery fell 4 percent, or $2.79, to $66.18 a barrel on the New York Mercantile Exchange. The contract tumbled $2.79 to settle at $68.97 on Wednesday.

Prices for gasoline and heating oil also were sharply lower. The price for natural gas, which reached a seven-week high Wednesday after plunging for most of the year, was essentially flat.

Oil prices have been pushed higher for months by the weak dollar and by strengthening equities markets, but analyst Phil Flynn of PFGBest said the fundamentals are increasingly hard to ignore.

A government report Wednesday showed a more larger than expected build up in crude oil supplies. Oil demand fell by 3 percent, the government reported, and gasoline supplies surged by more than 5 million barrels even though refineries took in 316,000 fewer barrels of crude each day.

Still, the US dollar continues to influence prices because a weak dollar effectively makes dollar-based crude cheaper.

Investors watched the opening Thursday of a two-day meeting in Pittsburgh for the world's 20 most powerful leaders. News from that meeting could sway the value of the dollar and oil.

In London, ICE Brent crude fell $2.84 to $65.15 on the ICE Futures exchange.