* Midday turnaround lifts equities and oil
* US combined crude, product stocks rise to weekly record
* EIA data shows a drop in crude stock vs API increase
* Coming up: U.S. initial jobless claims, Thursday
(Recasts, updates prices, market activity, changes byline and
moves dateline from previous LONDON)
By Robert Gibbons
NEW YORK, Aug 18 (Reuters) - Oil prices reversed deep early
losses by midday on Wednesday as equity markets pulled higher,
with traders setting aside data showing combined U.S. crude and
product stocks rose to the highest since weekly records began
in 1990.
U.S. stocks turned positive as reassuring same-store sales
forecast from retailer Target pushed consumer stocks higher,
with the S&P 500 index rising more than 0.5 percent, dragging
other risk assets like oil with it on hopes that good corporate
results reflected improved economic conditions.[]
U.S. crude oil futures <CLc1> dipped 27 cents to $75.50 a
barrel by 1:39 p.m. EDT (1739 GMT), having earlier dropped to
$73.83, the lowest price since July 7.
ICE Brent <LCOc1> fell 39 cents to $76.54, having flipped
into its biggest premium to the U.S. benchmark in about two
months on Tuesday. That premium narrowed about 15 cents to 65
cents as U.S. crude oil stockpiles began to ebb.
"You had a pop in equities and that helped crude bounce off
its low," said Richard Ilczyszyn, senior market strategist at
Lind-Waldock in Chicago.
Crude slumped early after data from the U.S. Energy
Information Administration showed combined inventories of crude
and refined products, excluding the Strategic Petroleum
Reserve, reached 1.130 billion barrels last week, topping the
1.127 billion barrels struck in Sept. 1990. On a monthly basis,
inventories peaked at 1.37 billion barrels in 1980. []
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Graphic on WTI's relation to Brent and Cushing stocks:
http://link.reuters.com/sap65n
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EIA VS API
The EIA data showed a 818,000 barrel drop in U.S. crude
stocks, roughly in line with analysts' forecast for a 1 million
barrel drop.
But that contrasted with Tuesday's report from the industry
group the American Petroleum Institute, which said crude oil
stocks rose 5.9 million barrels last week. []
"The bearish expectations got out sized on the API report,
and the equity-oil correlation remains intact, as the same
sentiment that raises and dashes expectations for the global
economy produces the same price effects for now," said John
Kilduff, partner at Again Capital LLC in New York.
Oil prices have been stuck in a $65 to $85 trading range
for about the last 12 months as increases in energy demand in
emerging markets has been insufficient to drain ample supplies
in other areas in the world.
Crude oil stocks at Cushing in Oklahoma, the delivery point
of U.S. crude fell 687,000 barrels to 37.0 million barrels, but
still near recent high levels.
The high inventories at Cushing helped push North Sea
benchmark Brent crude prices to a premium to U.S. crude. Many
investors put their money on moves of the spread between these
crude oil contracts. <CL-LCO1=R>
The premium of Brent has been around a two-month high since
Tuesday. In the week to Aug. 6, crude oil supplies at Cushing
stood at 37.7 million barrels in the week to Aug. 6, just shy
of a record 37.9 million barrels in mid-May.
Also helping keep Brent at a premium to U.S. crude was news
Royal Dutch Shell <RDSa.L> declared force majeure on its
Nigerian Bonny Light oil stream after a rise in sabotage on its
pipelines cut output by up to 100,000 barrels per day.
[]
(Reporting by Alejandro Barbajosa in Singapore and Ikuko
Kurahone in London; Editing by Marguerita Choy)
