( AP )- Oil prices pulled back sharply Wednesday after the government released data suggesting that the high price of oil and gasoline are depressing demand for petroleum products.
The demand numbers in the Energy Information Administration's weekly inventory report overshadowed data showing that supplies of oil grew less than expected last week, while gasoline and heating oil supplies fell.
Gas prices at the pump, meanwhile, slipped lower for the third day while diesel fuel rose to another record.
Overall consumption of oil and its products fell by 3.2 percent over the last four weeks compared to the same period last year, the EIA said. Demand for gasoline fell by 1 percent over the same period.
"It doesn't look like we've got much in the way of demand here for gasoline," said Tim Evans, an analyst at Citigroup Inc., in New York.
Light, sweet crude for April delivery fell $4.94 to settle at $104.48 a barrel on the New York Mercantile Exchange. The April contract expired at the end of Wednesday's session, and trading was much heavier in May oil futures, which fell $5.96 to settle at $102.54 a barrel on the Nymex.
The market's reaction to the tepid demand data marked a change from its recent focus on the falling dollar, with investors looking more closely at oil supply and demand fundamentals. Prices have jumped sharply in recent weeks as investors looked to the dollar for direction and ignored evidence of rising supplies, falling demand and a weakening economy.
Oil and other commodities are viewed as a hedge against inflation, and tend to rise in price when the dollar falls. Also, a falling dollar makes oil less expensive for overseas investors.
But some analysts wondered whether the market's tether to the dollar may be ending.
"Could it be that (investors have) finally noticed that the big picture here is not bullish?" Evans said.
Investors shrugged off EIA data showing that crude oil supplies grew by 200,000 barrels last week, much less than the 2.1 million barrel increase analysts surveyed by Dow Jones Newswires, on average, had expected.
Gasoline inventories fell by 3.5 million barrels, when analysts had expected a small increase, and supplies of distillates, which include heating oil and diesel fuel, fell by 2.9 million barrels, more than double the expected decline.
Further depressing demand for oil was refinery activity, which fell by 1.2 percentage points last week to 83.8 percent of capacity, a sign refiners are cutting back on production of low-margin gasoline. Gasoline crack spreads - the difference between what refiners pay for oil and make for selling gasoline - have dipped into negative territory several times in the last week, analysts said.
At the pump, meanwhile, prices dipped by 0.1 cent to a national average of $3.279 a gallon, according to AAA and the Oil Price Information Service. Gas prices followed oil prices to new records in recent weeks, but have paused as oil's march higher has stalled.
Still, gas prices are 72 cents higher than a year ago, and the government and analysts expect prices to spike as high as $3.50 to $4 a gallon this spring as suppliers stock up in advance of peak summer driving season.
High prices are adding to the woes of consumers already facing high food prices and falling home values. But oil prices are also pushing diesel and jet fuel to records. Diesel rose a cent Wednesday to a record of $4.025 a gallon, the AAA and Oil Price Information Service said. Jet fuel fetched a record spot price of $3.21 a gallon at New York Harbor on Tuesday, according to the Energy Department.
Truckers say the fuel surcharges they pass on to customers aren't covering diesel's rising cost, and they are struggling to make ends meet. Airlines are cutting capacity and jobs, and considering mergers, to cope with rising fuel costs.
If oil's long-predicted retreat has begun, prices of gasoline, diesel and jet fuel could also begin to fall.
Other energy futures also fell Wednesday. April gasoline futures fell 9.97 cents to settle at $2.5603 a gallon on the Nymex, and April heating oil futures fell 12.12 cents to settle at $3.0167 a gallon.
In London, May Brent crude futures fell $4.84 to settle at $100.72 a barrel on the ICE Futures exchange.