Oil falls after inventory report

The price of oil fell Wednesday after the government reported a sharp increase in the nation's supplies of crude and gasoline.

Light, sweet crude for November delivery was down $3.15 to $86.93 a barrel on the New York Mercantile Exchange. Oil had traded down about 75 cents just before the government figures were released.

In its weekly inventory report, the Energy Information Administration said the nation's stockpiles of crude oil rose by 8.1 million barrels last week. Analysts were expecting crude stocks to have fallen 1 million barrels, according to a survey of industry experts by energy research firm Platts.

Supplies of gasoline rose by 7.2 million barrels, compared to estimates of a 2 million barrel increase. And distillates, used to make heating oil and diesel fuel, fell by 500,000 barrels.

Distillates supplies were forecast to rise by 1 million barrels.

The price of oil rose above $90 earlier Wednesday after the Federal Reserve lowered its benchmark interest rate to 1.5% from 2%. The move was part of a coordinated effort by central banks worldwide to combat the credit crisis.

Stocks opened lower despite the Fed's emergency move. But the major indexes recovered in late morning trade.

The oil market has closely followed the stock market recently as investors look for signs of economic recovery that could signal renewed demand for oil and gas.