May 4 (Bloomberg) -- Crude oil fell more than $2 a barrel after a government report showed that U.S. gasoline supplies rose for the first time in nine weeks, easing concern that refiners won't be able to supply enough fuel during the summer months.

``Gasoline inventories rose because there was a lift in imports and a flat demand number,'' said Bill O'Grady, an analyst with AG Edwards & Sons in St. Louis. ``There has yet to be a significant increase in refinery activity and supplies rose. We are seeing gasoline prices rise high enough for consumption to get hit.''

Crude oil fell 3.1 percent yesterday after the Energy Department reported that gasoline stockpiles jumped last week. Supplies plunged 11 percent in the previous eight weeks, stoking concern that inventories may be inadequate and inflating pump prices. Consumption in the past four weeks was little changed from a year earlier, the report showed.

Crude oil for June delivery fell $2.34, or 3.2 percent, to $69.94 a barrel on the New York Mercantile Exchange, the lowest close since April 13. It was the first dip below $70 a barrel since April 17. Futures touched $75.35 on April 21 and 24, the highest since trading began in 1983. Prices are up 40 percent from a year earlier.

Futures fell 6.3 percent in the last two days, the biggest two-day decline since mid-May 2005.

Gasoline for June delivery plunged 9.11 cents, or 4.4 percent, to $1.9946 a gallon in New York, the lowest since April 7. Futures are up 36 percent from a year ago.

Isolated Problems

``A lot of the air has come out of the gasoline market, which is pulling crude oil lower,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``It now looks like any problems will be isolated, not nationwide. Oil and gasoline prices won't be as outrageous as was thought by some.''

Introduction of new fuel blends that may make it harder for refiners to meet demand this year has also increased prices. Refineries last week operated at 88.8 percent of capacity, up 0.6 percentage point from the week before. Refineries operated at 91.7 percent of capacity a year earlier.

Prices have also risen this year on concern that shipments from Iran, the fourth-biggest producer, may be cut if the United Nations imposes sanctions because of the country's nuclear program. Nigerian and Iraqi shipments have been reduced because of unrest.

``I don't think we will see oil fall below $65 anytime soon because of Iran and Nigeria,'' Lynch said. ``It doesn't look like there will be any positive change in those countries in the near term.''

Proposed Resolution

The U.S., U.K. and France yesterday proposed a resolution in the UN Security Council demanding Iran cease uranium enrichment, and said they would seek sanctions should the government in Tehran fail to comply. The U.S. has rejected Iran's assurances the uranium is needed for power stations, not weapons.

China and Russia, both permanent members of the council with a veto, opposed the measure.

French Prime Minister Dominique de Villepin said today resorting to war to stop Iran from getting nuclear weapons would deepen the problems in Iraq and the rest of the Middle East. ``Military action is certainly not the solution,'' he said in Paris.

Royal Dutch Shell Plc said today unrest has halted output of 455,000 barrels of oil a day at its Nigerian facilities at the end of the last quarter. The Movement for the Emancipation of the Niger Delta attacked Shell's pipelines and the Forcados export terminal in February.

OPEC Comments

OPEC Acting Secretary-General Mohammed Barkindo said oil markets are ``well-supplied'' and that crude prices should come down as idled refineries resume production of gasoline and other oil products. The Organization of Petroleum Exporting Countries produces about 40 percent of the world's oil.

``Products for some time have been driving prices, so the solution to the problem of gas should be positive to the market,'' Barkindo told reporters today at an energy conference in Houston.

Barkindo said concern over geopolitical issues, such as the dispute over Iran's nuclear program, add a per-barrel premium of about $10 to $15 to oil prices.

Profits Surge

Oil-company profits have surged with record prices, which have led to calls by governments for a bigger share of their earnings. Shell and Total SA reported today that first-quarter profit rose, beating analysts' forecasts, as near-record oil prices compensated for declining production and higher taxes.

The world's five largest oil companies earned about $29 billion in the period, or $4.46 for every person on Earth, as oil prices headed toward last month's records of more than $75 a barrel.

Brent crude oil for June settlement declined $2.36, or 3.3 percent, to $70.29 a barrel on the London-based ICE Futures exchange, the lowest close since April 12. Futures touched $74.97 a barrel yesterday and May 2, the highest since the contract began trading in 1988.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

Last Updated: May 4, 2006 15:32 EDT