* U.S. crude stocks rise by less than expected - EIA
* 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 stockpiles of U.S. crude outweighed
positive economic data.
U.S. crude for October <CLc1> was down 96 cents at $71.09 a
barrel by 1514 GMT, after falling $2.32 on Tuesday. Earlier on
Wednesday, prices had bounced to $72.64, before turning lower.
Brent crude <LCOc1> fell 91 cents to $70.91 a barrel after
losing $2.44 the previous day.
The U.S. Energy Information Administration (EIA), the
statistical arm of the Department of Energy, reported on
Wednesday that crude stocks in the world's largest energy
consumer rose by 200,000 barrels last week.
While the build in crude stocks was no where near as large
as the 4.3 million rise reported by the American Petroleum
Institute on Tuesday, it still confounded initial market
predictions for a 1.1 million barrel drop. []
"We remain in a situation of massive over-supply, which is
off the charts, but it does appear to be peaking," Summit Energy
analyst Brad Samples said.
Gasoline stocks fell by 1.7 million barrels last week
according to the EIA, against expectations for a smaller 1
million barrel drop, while distillates rose by 800,000 barrels
compared with predictions for a 300,000 barrel build.
SELL-OFF?
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.
Some analysts said the failure to break through the key
level may signal that prices have topped out, with demand for
oil still depressed by the global economic slowdown and signs of
a broad recovery still murky.
"The price action of the past 24 hours would appear to
favour additional price declines," said Jim Ritterbusch,
president of Ritterbusch & Associates, adding the failure to
break the $75 level could see prices fall by as much as $10.
Prices took some support from U.S economic data released on
Wednesday showing a mild recovery in the housing market, but
earlier data on durable goods orders suggested lingering
weakness in the manufacturing sector.
Equity markets were mixed with Wall Street edging higher
while European bourses generally dipped, highlighting the
uncertainty surrounding the economic outlook.
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
sharp decline.
(Additional reporting by the New York Energy Desk and Ramthan
Hussain in Singapore; editing by Sue Thomas)
