(New throughout, updating market activity and comments to U.S. session; changes byline and previous LONDON dateline)
* Brent, U.S. crude hit 2-1/2 mth low before U.S. inventory report
* U.S. govt likely to cite 1 mln bbls build for last week - poll
* Industry group API indicates build above 6 mln bbls
* OPEC report points to 560,000 bpd surplus in 2016
* Coming up: U.S. government report on crude inventories, 1600 GMT
By Barani Krishnan
NEW YORK, Nov 12 (Reuters) - Crude oil futures hit 2-1/2 month lows on Thursday as OPEC's forecast it could overproduce half a million barrels daily next year at current production rates weighed on a market already fearing a seventh weekly build in U.S. inventories.
OPEC said in a monthly report its output fell in October and forecast that rival producers outside the group would produce less oil next year due to low crude prices and investment cuts on exploration. urn:newsml:reuters.com:*:nL8N1373QT
But the Organization of the Petroleum Exporting Countries said its output could trend higher again next year, with a 560,000-barrels per day (bpd) surplus, if it continued pumping at October's rate of 31.38 million bpd.
"The drumbeat is building behind something we've been highlighting for a while, that the global market is getting saturated with oil supply," said Matt Smith, who tracks global crude cargoes for New York-headquartered Clipper Data.
"There continues to be a build up of ships in the U.S. Gulf, more than double usually this time of year, waiting to discharge oil."
Brent futures LCOc1 fell 85 cents, or 2 percent, to $44.96 a barrel by 10:09 a.m. EST (1509 GMT). The session low was $44.59, the lowest since Aug 27.
U.S. crude futures CLc1 were 80 cents, or 1.9 percent, lower at $42.13.
Crude futures have fallen in six of the last seven sessions, losing more than $5 a barrel.
Losses have accelerated since Wednesday, after industry group the American Petroleum Institute reported U.S. crude inventories rose 6.3 million barrels last week, versus a modest 1 million-barrel build expected by analysts in a Reuters poll.
The U.S. Energy Information Administration will issue official inventory data at 11:00 a.m. EST (1600 GMT), delayed a day due to the Veterans Day holiday.
Reuters shipping data showed tankers with nearly 20 million barrels of Iraqi oil due to sail to the United States in November, almost 40 percent above the amount booked to arrive in October. That would be the largest U.S. monthly import of Iraqi oil since mid-2012. urn:newsml:reuters.com:*:nL8N1363PM
Iraq is OPEC's No. 2 crude producer.
In another sign of oversupply, a traffic jam of about 40 oil tankers has emerged along the U.S. Texas coast. urn:newsml:reuters.com:*:nL1N13101Q
"(OPEC) are trying to put a positive spin on it by saying the decline in prices will encourage some demand, but they're also saying the reason for the drop in the first place is because supply is still outstripping demand," CMC Markets analyst Jasper Lawler said.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC-Brent trading data:
http://reut.rs/1kO5Nak GRAPHIC-China commodities index:
http://reut.rs/1SKbcen GRAPHIC-World petroleum oversupply:
http://link.reuters.com/jaz84w
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