Oil Futures Tumble On France, US Supply

--Futures decline as US oil inventories rise to a seven-month high
--Oil recently down 2% to $105.14/bbl
--France's statements on strategic oil release also weigh

NEW YORK -- Crude-oil futures fell Wednesday as U.S. oil inventories surged higher and a French official said the country is considering whether to release oil from its strategic reserves.

Light, sweet crude oil for May delivery recently traded $2.19, or 2%, lower at $105.14 a barrel on the New York Mercantile Exchange after moving below $105 a barrel. Brent crude oil on the ICE futures exchange traded $1.71 lower at $123.83 a barrel.

Crude-oil prices, which fell throughout the session Wednesday, declined further after the U.S. Energy Information Administration reported that U.S. oil stockpiles rose by 7.1 million barrels last week to a seven-month high. Analysts had expected a more modest 2.2-million-barrel increase, and the larger build suggested that, at least in some parts of the U.S., supplies are plentiful.

"It's huge," Tony Rosado, a broker at GA Global Markets, said of the inventory report. "If you've been fighting against this market at $106, $107, these numbers should make you a happy camper. The market should be working lower."

Gasoline stockpiles fell by 3.5 million barrels, the EIA said, with some of those declines reflecting a change to summer-grade fuels from winter-grade fuels. Analysts had expected a 1.5-million-barrel drop. Stocks of distillates, which include heating oil and diesel fuel, fell by 700,000 barrels.

Gasoline futures pared early losses on the inventory drop, with front-month April reformulated gasoline blendstock, or RBOB, recently trading 3.81 cents lower at $3.3675 a gallon after falling as low as $3.3439 earlier in the session.

Still, the weekly data added to worries among oil traders that prices are due for a correction. Earlier Wednesday, new speculation that developed countries will release oil from their strategic stockpiles in an effort to combat high crude-oil prices sent futures lower.

France is working "alongside the U.S. and the U.K. in the consultation with the IEA [International Energy Agency], which could allow reserves to be used," said French government spokeswoman Valerie Pecresse on Wednesday.

The statements follow pledges earlier this month from U.S. and U.K. leaders that they will keep open discussion about an oil release. But last week, the IEA's executive director said the agency hadn't discussed plans for a release with its members.

"It's looking more and more like they are going to go ahead and do it," said Carl Larry, head of trading adviser Oil Outlooks and Opinions.

A release of oil from strategic stockpiles would bring futures prices back to near $100, Larry said, though he said he doubted a release will have much of a long-term impact.

Oil prices in recent weeks have held in a narrow band between $105 and $110 a barrel, as investors are worried that any push higher would convince developed nations to provide additional supplies.

Smaller price swings suggest a larger break in prices one way or the other is ahead, said Rich Ilczyszyn, a broker at II Trader in Chicago.

"The daily ranges are getting tighter and tighter and tighter. Something is going to happen when the market is consolidating like this," Ilczyszyn said.

April heating oil recently traded 2.28 cents, or 0.7%, lower at $3.1958 a gallon.