* Extends Tuesday fall on bearish API crude stocks data
* Upbeat economic data seen largely factored into oil prices
* OPEC unlikely to increase output at September meeting
(Updates throughout)
By David Sheppard
LONDON, Aug 26 (Reuters) - Oil pared early gains to drop to
near $71 a barrel on Wednesday, extending losses from the
previous session as rising U.S. crude stockpiles and a dip in
equity markets outweighed bullish economic data.
U.S. crude for October <CLc1> was down 90 cents at $71.15 a
barrel by 1343 GMT, after falling $2.32 on Tuesday. Earlier on
Wednesday, prices had bounced to $72.64, before turning lower.
Brent crude <LCOc1> fell 78 cents to $71.04 a barrel after
losing $2.44 the previous day.
Investors took the opportunity to lock-in profits on Tuesday
after crude touched the key psychological $75 mark for the first
time since last October, crowning a near 130 percent jump in
prices from the lows at the turn of the year.
The sell-off was extended after the American Petroleum
Institute (API) reported an unexpected 4.3 million barrel rise
in U.S. crude stocks, confounding analysts' expectations for a
1.1-million-barrel fall, and coming after the 8.4-million-barrel
drop the week before which had sparked the latest rally. []
Gasoline stocks fell 1.8 million barrels, the API said, more
than the 1 million-barrel drop predicted, while distillates fell
by 146,000 barrels, versus forecasts for a 300,000 barrel rise.
"The price action of the past 24 hours would appear to
favour additional price declines," said Jim Ritterbusch,
president of Ritterbusch & Associates, adding that the failure
to break the $75 level could spur a sizeable correction.
Ritterbusch said the market expected the API figures to be
confirmed by those from the U.S. government's Energy Information
Administration (EIA), due out at 1430 GMT on Wednesday, as the
two fuel stocks reports have aligned in recent weeks.
PRICING IN A RECOVERY?
Oil prices were pressured by a dip in equities and a firmer
U.S. dollar on Wednesday, which traders said have been the two
key external factors in the crude market in 2009.
Investors have been viewing recent strength in equity
markets as a sign of impending economic recovery, which should
boost demand for oil, while weakness in the dollar tends to
boost buying of commodities priced in the greenback.
Shares in the United States and Europe fell on Wednesday,
despite Ifo's closely-watched survey of German business morale
showing a bigger-than-expected improvement and U.S. government
data showing a sharp rise in new orders for long-lasting U.S.
manufactured goods in July. [] []
Oil analysts said a lot of the positive economic data had
already been factored into the price of crude by traders, while
global inventories of crude remain at very high levels.
Venezuela's oil minister Rafael Ramirez said OPEC is
unlikely to raise output at its September meeting, despite
concerns from some quarters that oil prices are too high for a
still fragile global economy. []
"Inventories have declined but they remain above average. We
need for them to come down to the average levels," Ramirez said.
Another member of the Organization of the Petroleum
Exporting Countries, Iran, said oil demand was set to increase
next year by up to 1 million barrels per day after this year's
decline.
(Additional reporting by Gene Ramos in New York and Ramthan
Hussain in Singapore; editing by Sue Thomas)
