US crude supplies plummet: EIA

NEW YORK (Reuters) - U.S. crude inventories dropped to an eight-month low last week and stocks of gasoline slumped to their lowest level in two years, a weekly government report said Wednesday.

U.S. crude oil dropped by 7.1 million barrels to 322.6 million barrels as imports fell by 670,000 million barrels per day to 9.563 million bpd, the Energy Information Administration said.

Gasoline supplies fell 700,000 barrels to 190.4 million barrels, the lowest level since the week ending September 2, 2005, according to EIA data.

U.S. crude oil stocks have fallen 14.5 million barrels in the last three weeks but remain above the upper range of the average for this time of year, according to EIA, the statistical arm of the Department of Energy.

"The reality is that the crude tightness in Europe and Asia has begun to affect the U.S. market in a big way," said Antoine Halff of Fimat Research in New York. "In retrospect it validates OPEC's decision to increase production."

OPEC ministers agreed to boost output by 500,000 bpd effective November 1 at their regular meeting in Vienna on Tuesday in a bid to keep oil prices under control amid rapidly falling fuel stocks in oil consuming nations.

The sharp fall in crude oil inventories came even as oil refinery operations slowed. Capacity utilization at U.S. refineries dropped to 90.5 percent from 92.1 percent a week earlier amid weakening refining margins and the beginning of the fall refinery maintenance season.

Distillate stocks rose 1.8 million barrels to 134 million barrels despite the drop in usage.

In a separate report released Wednesday, industry group American Petroleum Institute reported a large fall in crude oil supplies but increases in inventories of refined products. Crude oil stocks fell 5.22 million barrels to 321.5 million barrels in the week to Sept. 7, with gasoline inventories up 3.33 million barrels at 200.1 million barrels and distillate stocks up 5.67 million barrels at 137.6 million barrels.