Oil futures sank to their lowest level in eight months Wednesday after the government said oil inventories rose to their highest level since 1990, while gasoline demand in the U.S. fell sharply.

Crude also was weighed down by the Federal Reserve's decision to extend "Operation Twist" while stopping short of more aggressive measures.

The U.S. Energy Information Administration said commercial oil inventories last week rose 2.9 million barrels to 387.3 million barrels, the highest level since July 1990, reversing two weeks of falling stockpiles, amid sinking demand in the world's biggest consumer.

U.S. oil inventories have been elevated for months due to a combination of a weak economic recovery and rising production. Earlier this month U.S. oil production had risen to the highest level in 14 years.

Inventories of refined products also rose last week. Gasoline inventories last week rose 900,000 barrels. Stocks of distillates, including heating oil and diesel, increased 1.2 million barrels, while refiners cut runs by 0.1 percentage point to 91.9% of capacity. Analysts expected oil inventories last week to fall 1 million barrels, according to a survey by Dow Jones Newswires. Gasoline stocks were expected to rise 400,000

Crude futures for August delivery on the New York Mercantile Exchange rose to $79.48

Brent oil for August settlement increase $1.47 to $90.70 a barrel on the London-based ICE Futures Europe exchange.

Gold prices steadied near $1,565 an ounce on Friday as the European Central Bank's decision to ease collateral requirements lifted the euro, but gold remained on track for its biggest weekly loss this year after U.S. stimulus measures disappointed.

The metal posted its steepest one-day drop since February 29 on Thursday, a day after the Federal Reserve held off on a new round of quantitative easing, or printing money to buy bonds, to boost growth in the United States.

Talk that more stimulus measures were on the way, which would maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom and weighing on the dollar, had buoyed the metal earlier this month.

It has since erased the bulk of its gains both for June and for the year as a whole.

Gold found support as the euro hit session highs versus the dollar, with market participants citing a combination of short-covering and news on the ECB easing collateral requirements, in a move designed to ease pressure on Spain.

The June gold futures on the COMEX today fell to 1572.0 dollars per ounce.

Change % Change Last

Gold 1,567 -49 -3.00%

Oil 78.42 -3.03 -3.72%