SIOUX FALLS, South Dakota (AP) — Energy prices plunged across the board yesterday after a government report showed US oil reserves were much greater than expected, suggesting demand continues to fall.

Sweet crude for February delivery tumbled 12 percent, or $5.95, to settle at $42.63 a barrel on the New York Mercantile Exchange after the report was released.

The Energy Information Administration said inventories of commercial crude oil inventories rose 6.7 million barrels, well beyond the 1.5 million-barrel build expected by analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., can influence market trading.

Analyst Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said it was one of the more bearish EIA reports he's seen in a while.

"This will take a lot of steam out of the geopolitical argument that this Russian-Ukraine stand-off is going to disrupt supplies appreciably," Ritterbusch said. "This report's telling us that we've got a big supply cushion out there that can easily absorb a temporary curtailment of European supply."

Russia Prime Minister Vladimir Putin yesterday ordered Gazprom to stop all shipments of natural gas to Europe through Ukraine.

Russian gas is already failing to get through the pipelines that cross Ukraine. Gazprom has blamed Ukraine, saying Russia has delivered the gas but Ukraine is stealing gas intended for Europe.

Oil prices had climbed 43 percent since reaching a five-year low of $33.87 a barrel on December 19.

"This has been a speculatively led rally here in the past couple of weeks," Ritterbusch said. "It didn't have a lot of fundamental impetus behind it, and now we're getting evidence that there's a lot more crude and product supply out there than what we thought."

The crude futures market is now in what oil traders call a "contango" — in which oil delivered in the next few weeks is cheaper than in the following months. Sweet crude for March delivery was trading at $49.34, about $5 cheaper than the February contract.

"A steep contango in the front of the NYMEX crude curve and the low cost of carry due to easier monetary policy has provided the economic incentive to store barrels," Linda Rafield, senior oil analyst for Platts, said in an analyst note.

Crude has become so cheap, it is being stored at sea to avoid selling it at current market prices.

"Demand for oil appears to remain weak as traders are seeking as many as 10 supertankers to store crude," Addison Armstrong, director of market research at Tradition Energy, said in a research note. "The carriers hold about two million barrels of crude and traders are seeking to lease the ships for three to nine months."

Investors have also been concerned that a conflict between Israel and Hamas in Gaza could spread to the rest of oil-rich Middle East and affect supplies.

Yesterday, French President Nicolas Sarkozy said that Israel and the Palestinian Authority have accepted an Egyptian-French plan for Gaza.

Sarkozy made no mention of Hamas, the group that controls Gaza and is fighting with Israel, and an Israeli government spokesman stopped short of endorsing the plan.

The national average at the gas pump rose about four cents overnight to $1.727 a gallon but remains well below year-ago levels, according to auto club AAA, the Oil Price Information Service and Wright Express.

Rising prices coincide with a drop off in gas consumption, according to the weekly SpendingPulse report by MasterCard released Tuesday.

Consumption fell 1.8 percent for the week ended Friday and was down 3.5 percent from the same week a year ago, according to SpendingPulse. The four-week moving average was even worse, falling 4 percent compared with a year ago and widening for the fourth straight week.

Equity investors have so far this year brushed off signs of a severe global economic slowdown, pinning their hopes on a second half recovery spurred by massive government spending and lower interest rates.

Oil traders often look to stock markets as a barometer of investor sentiment about the economy.