* API reports U.S. crude decline of 7.6 mln bbls last week
* Reuters poll forecast crude build of 2.6 mln bbls
* Brent hits June 10 high during session, WTI July 5 peaks (New throughout, updating market activity and comments after API report of surprise U.S. crude stockpile drawdown)
By Barani Krishnan
NEW YORK, Oct 4 (Reuters) - Oil settled down on Tuesday after a surging dollar offset optimism over planned OPEC output cuts, before a report suggesting another weekly drop in U.S. crude stocks took prices up again post-settlement toward four-month highs.
The American Petroleum Institute (API), a trade group, reported that domestic crude inventories likely fell for a fifth straight week, declining by 7.6 million barrels. API/S
The U.S. government's Energy Information Administration (EIA) will report official stockpile numbers on Wednesday. Analysts polled by Reuters expect the EIA to report a stock build of 2.6 million barrels for the week ended Sept. 30. EIA .
If the EIA reports another drawdown, "it means we can't take for granted that we're going to be seeing builds for this time of year, even though it's traditionally what we see", said Matt Smith, analyst at Clipperdata, a New York-based firm that tracks oil shipments into the United States.
"Refinery runs are higher than they were this time last year and so, we are still seeing more crude being consumed on a relative basis," Smith added.
Brent crude LCOc1 settled down 2 cents at $50.87 a barrel, after rising to $51.37 during the session, its highest since June 10.
U.S. West Texas Intermediate (WTI) crude CLc1 closed down 12 cents at $48.69, after hitting $49.13 earlier, a peak since July 5.
The two benchmarks rose about 40 cents each on the API data, with Brent at $51.25 and WTI at $49.19 by 5:00 p.m. (2100 GMT)
Oil has risen more than 10 percent over the past five sessions since the Organization of the Petroleum Exporting Countries revived expectations that it would limit output at its policy meeting in Vienna on Nov. 30. OPEC deal looks more and more like hot air but oil's still very technically-driven," said Stig Rasmussen, senior proprietary trader at Danske Commodities in Aarhus, Denmark.
Rasmussen's next upside target for Brent was $52.86. "I imagine at that point, shale oil companies will be hedging bigger volumes for 1-2 years ahead."
U.S. shale producers were hedging future oil output at their highest levels this year, analysts at Morgan Stanley (NYSE:MS) noted, as the calendar 2017 strip for crude CLCALYZ7 hit mid-August highs of $52.29 on Tuesday. target is to bring its production to between 32.5 million and 33.0 million barrels per day by cutting some 700,000 bpd from a glut of about 1.0 million-1.5 million bpd estimated by analysts. The group has invited Russia and other major producers to join in making cuts.
A Reuters survey last week showed OPEC output likely hit record highs of 33.6 million bpd in September. GRAPHIC-OPEC, non-OPEC production
http://tmsnrt.rs/2ctYZNY GRAPHIC-OPEC's struggle
http://tmsnrt.rs/2cWq5NN GRAPHIC-Asia's Iranian crude oil imports
http://tmsnrt.rs/2cNidjY
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