By Myra P. Saefong & Moming Zhou, MarketWatch SAN FRANCISCO (MarketWatch) -- Crude-oil futures touched their lowest level in nearly 16 months Wednesday as continued worries over slowing demand combined with four weeks' worth of rising U.S. crude and gasoline supplies to pull prices down by as much as 6.5% -- despite market expectations that key oil producers will cut production. "If the threat of cutbacks at the OPEC meeting sent any bears into hibernation this ought to bring them out of their caves," said James Williams, an economist at WTRG Economics. "The combination of a stronger dollar and a report that shows very strong increases in crude and product inventories coupled with total consumption down 8.5% (1.7 million barrels) from last year is very negative for oil prices." On its first full day as a front-month contract, crude for December delivery touched a low of $67.50 per barrel in electronic trading on Globex. That was the weakest front-month contract level seen since late June 2007. The contract was last down $4.10, or 5.7%, at $68.08. On the New York Mercantile Exchange, it traded at $67.90, down 5.9%, or $4.28. The Organization of the Petroleum Exporting Countries, which controls more than 40% of the world's oil production, is scheduled to hold an extraordinary meeting Friday in Vienna. But the supply news "will give OPEC members like Venezuela and Iran more ammunition when they call for large reductions in OPEC production," Williams said in emailed comments. Crude supplies rose for a fourth week, up 3.2 million barrels for the week ended Oct. 17 to stand at 311.4 million, according to the Energy Department Wednesday. They're up a total of 21.2 million barrels in four weeks, data showed. In a separate report, the American Petroleum Institute said crude inventories were up 2.8 million barrels at 306.1 million. "Oil supply is still outpacing oil demand," Chris Lafakis, an associate economist at Moody's Economy.com, said in a report released after the supply data. And "the combined pace of gasoline production and net imports is outpacing consumer demand for gasoline." The U.S. is the world's biggest oil consumer, accounting for nearly a quarter of global consumption. Downward drive Motor gasoline supplies also climbed 2.7 million barrels to 196.5 million barrels, the EIA said. They're up 17.8 million barrels in four weeks. Supplies of the fuel rose 2.1 million barrels to 193.8 million, according to the API. And distillate stocks rose for the first time in eight weeks, up 2.2 million barrels to 124.3 million, the EIA reported. They were up 293,000 barrels in the latest week to stand at 125.7 million, according to the API. Meanwhile, prices for regular gasoline at the pump fell more than 3 cents a gallon from Tuesday, hitting a national average of $2.858 Wednesday, according to AAA's Daily Fuel Gauge Report. Gas prices are only about 4 cents higher than a year ago. Against this backdrop, futures prices for petroleum products moved lower. November heating oil fell 10 cents, or 4.6%, to $2.077 a gallon. November reformulated gasoline was down 10.4 cents, or 6.2%, to $1.5875 a gallon. Demand for petroleum products over the last four-week period averaged 18.7 million barrels per day, the EIA data showed. That's down 8.5% from the same time a year ago. Of that, motor gasoline demand averaged 8.8 million barrels per day, down 4.3% from the same time a year ago, according to the EIA. Refinery activity increased in the latest week, with refinery capacity rising to 84.8% from 82.2% a week earlier, the EIA said.

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