Oil falls below $66 as demand continues to ebb

A day after oil staged an Election Day rally, even indications that OPEC was acting on an earlier pledge to pull 1.5 million barrels of crude a day from the market failed to support prices.

Light, sweet crude for December delivery fell $5.23 to settle at $65.30 a barrel on the New York Mercantile Exchange. Prices fell despite a rally in Asian stock markets after the U.S. presidential election was settled, with Barack Obama becoming the first black to win the White House.

Oil prices surged above $70 a barrel for the first time in nearly two weeks Tuesday, mirroring global stock markets that strengthened in the U.S., Asia and Europe.

That one-day rally, however, "did not eliminate pervasive fears of a protracted global economic slowdown," Addison Armstrong, director of market research at Tradition Energy, said in a note Wednesday morning.

Oil prices have tended to mimic U.S. equities markets of late, and Wednesday was no different. The Dow Jones industrial average fell 95 points in late morning trading.

"What happens when you're in a bearish market that's trying to make a bottom is you do a sort of Texas two-step," said Peter Beutel, oil analyst at Cameron Hanover in New Canaan, Conn. "Oil goes up for a day or two, and the rug gets pulled out. It goes up for another day or so and the rug gets pulled out. The tide appears to be trying to change from an overwhelmingly lower trend to one that's sideways to higher."

On the supply front, U.S. crude inventories remained stable after rising the previous five periods, while gasoline stockpiles rose unexpectedly, according to government data released Wednesday.

For the week ended Oct. 31, crude-oil inventories remained at 311.9 million barrels, 1.5 percent above year-ago levels, the Energy Department's Energy Information Administration said in its weekly report.

Analysts had expected a boost of 500,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.