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UPDATE 7-Oil down 1 pct as record U.S. stockpiles heighten glut worry

Published 22/07/2016, 01:45 am
© Reuters.  UPDATE 7-Oil down 1 pct as record U.S. stockpiles heighten glut worry
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* Fear of oversupply weighs anew after Wednesday EIA data

* ABN says Brent could slide by about $5 to $42-43 levels (Updates market activity and comments to U.S. session; changes byline and dateline, previously LONDON)

By Barani Krishnan

NEW YORK, July 21 (Reuters) - Oil prices fell more than 1 percent on Thursday, erasing gains from the previous session, after a rise in U.S. gasoline inventories pushed supplies in the world's top oil consumer to a record high, reinforcing worries of a global glut.

Brent and U.S. crude futures rose by up to 1 percent on Wednesday after the Energy Information Administration (EIA) reported a crude inventory drop of 2.3 million barrels last week, versus forecasts for a 2.1 million barrels decline. EIA/S

Despite nine straight weeks of draws, U.S. crude inventories are at a historically high 519.5 million barrels for this time of year, the EIA said.

Total U.S. crude and oil product stocks rose 2.62 million barrels to an all-time high of 2.08 billion barrels, as gasoline stocks posted a surprise build of 911,000 barrels, despite expectations that record numbers of Americans took to the road this summer amid cheap pump prices.

On top of the EIA report, traders on Thursday said market intelligence firm Genscape cited a build of 725,176 barrels during the week to July 19 at the Cushing, Oklahoma delivery point for U.S. crude futures.

"The market is technically weak, inventories are still high for summer, maintenance season is not far off and we have floating barrels at sea to top it all," said Pete Donovan, broker at Liquidity Energy in New York.

Brent crude LCOc1 was down 55 cents, or 1.2 percent, at $46.62 a barrel by 11:41 a.m. EDT (1541 GMT).

U.S. West Texas Intermediate (WTI) crude fell 65 cents, or 1.4 percent, to $45.10.

ABN AMRO (AS:ABNd) senior energy economist Hans van Cleef said Brent could slip around $5 toward the $42-$43 a barrel level. "Near-term, there are still some downside risks."

The glut of refined products has worsened an already-grim outlook for U.S. crude oil for the rest of the year and the first half of 2017, traders warned this week, as the spread between near-term and future delivery prices reached its widest in five months. Davis, a trader at PSW Investments in California, also pointed to the 4.2 million-barrel build of "other oils" cited by the EIA, which eclipsed the gasoline build.

The other oils include special gas for smaller airplanes and less-known industrial oils, which refiners typically crank out when there is too much gasoline and distillate supply, Davis said.

"These other oils don't get as much attention as the headline numbers put out by the EIA and have been a clever and convenient way to hide weak product demand," he said.

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