Oil and gas futures fell Tuesday as concerns about refineries faded and OPEC suggested that the oil cartel sees no need to boost production.
Natural gas futures rose on jitters about a developing Atlantic storm system and as traders covered positions ahead of the September contract's expiration on Wednesday.
Gasoline futures have risen in recent days as a number of refinery outages rekindled concerns about fuel supplies.
"The driver here for the past three or four sessions has been gasoline," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
But several of those refinery problems, including a reported outage at Citgo Petroleum Corp.'s refinery in Corpus Christi, Texas, are being quickly resolved. A Citgo spokesman said the company does not comment on operational issues, but Ritterbusch said, "apparently, those units are in restart."
Also, a crude distillation unit at Valero Energy Corp.'s refinery in Port Arthur, Texas, has been restarted, although at a lower rate after down time of about a week. And Dow Jones Newswires reported that the processing units at a 330,000 barrel per day Chevron Corp. refinery in Mississippi have returned to service.
Gasoline for September delivery fell 2.39 cents to settle at $2.0154 a gallon on the New York Mercantile Exchange while October light, sweet crude fell 24 cents to settle at $71.73 a barrel.
Oil prices alternated between gains and losses after Abdalla Salem el-Badri, secretary general of the Organization of Petroleum Exporting Countries, told Dow Jones the oil market is well supplied.
"And it is," agreed James Cordier, president of Liberty Trading Group, in Tampa, Florida, noting that oil inventories are at record levels.
Cordier called Monday's oil and gasoline rally a temporary reversal of a longer-term bear market. As summer winds down, he argued, "we're going to be needing less and less gasoline."
Oil and gasoline traders are also anticipating Wednesday's inventory report from the Energy Department's Energy Information Administration. Gasoline supplies are expected to have fallen by 1.8 million barrels in the week ended Aug. 24, according to the average estimates of analysts surveyed by Dow Jones Newswires.
Crude oil inventories are expected to have fallen by 800,000 barrels, and distillate stocks, which include diesel and heating oil, are forecast to have built by 600,000 barrels. Refinery utilization rates are forecast to have remained unchanged at 91.6 percent.
Traders will most closely watch the gasoline inventory number, Ritterbusch said. If supplies grow or fall less than expected, "that's going to take the gasoline back down."
For his part, Ritterbusch expects gasoline supplies to grow.
In other Nymex trading, heating oil futures fell 1.34 cents to settle at $1.9963 a gallon, following the lead of oil and gasoline, Ritterbusch said.
September natural gas rose 21.3 cents to settle at $5.593 per 1,000 cubic feet after the National Hurricane Center said an area of disorganized storms in the Atlantic could strengthen and develop into an organized storm as it moves westward.
Also supporting natural gas prices was buying by investors who have bet that gas futures will fall to lock in profits or to cover their positions ahead of the contract's Wednesday expiration, analysts said.
Despite the rally, natural gas inventories are at record highs, and cooling demand has been low. Prices are below their year-ago levels, which could mean lower heating bills this winter for natural gas customers.
The reverse is true for heating oil inventories, which suffered from refiners' scramble to meet high gasoline demand earlier in the year. Heating oil inventories are lower than they were a year ago, and prices are higher, which could mean higher heating bills this winter for heating oil customers.
Associated Press writers George Jahn in Vienna, Austria and Gillian Wong in Singapore contributed to this report.