Oil extends decline toward $68 on demand concerns

                                
 * EIA data shows unexpected jump in crude, product stocks 
                                
* Dollar steadies after bounce, mood still bearish
                                
 By Fayen Wong
                                
 PERTH, Sept 24 (Reuters) - Oil prices extended losses and
fell closer toward $68 a barrel on Thursday, as data showing an
unexpectedly high build up in U.S. oil and products stockpiles
reminded traders that oil prices may have run ahead of the
demand fundamentals.
                                
 Crude oil prices fell nearly 4 percent in the previous
session and are on track to shed about 5 percent this week, as
demand concerns resurface.
                                
 U.S. crude for November delivery <CLc1> fell 44 cents to
$68.53 a barrel by 0237 GMT, after settling down $2.79 on
Wednesday.
                                
 London Brent crude fell 39 cents to $67.60 a barrel.
                                
 "A few factors were at play last night and the most notable
was the U.S. inventories number and that was unambiguously
bearish," said Toby Hassall, a commodities analyst at CWA Pty
Ltd in Sydney.
                                
 A bounce in the U.S. dollar and a weak equities market also
also combined to exacerbate oil's fall on Wednesday.
                                
 "The market has been very well supported by the recent
economic optimism and the falling dollar, but the latest EIA
numbers show there's that underlying downside risk for the oil
market," Hassall said.
                                
 The U.S. Energy Information Administration reported
commercial stockpiles of crude rose 2.8 million barrels in the
week to Sept. 18, against analysts' expectations of 1.5 million
barrels fall. [EIA/S]
                                
 Gasoline inventories increased by 5.4 million barrels to
213.1 million, and distillates gained 3.0 million to hit a
26-year high of 170.8 million, according to the EIA.
                                
 The worst global recession since the Great Depression has
battered demand in the United States and other big consumer
nations, shaving crude prices off record highs near $150 a
barrel struck in July 2008 to below $33 a barrel in December.
                                
 But with prices having risen about 54 percent this year to
reach a 2009 high of $75 a barrel in August, amid  ebullience
on the economic outlook, most analysts feel some convincing
evidence of a recovery in global demand is now needed to push
oil out of the top of the $68-$75 price range where it has
traded in the third quarter.
                                
 BNP Paribas also cautioned that a recent string of positive
economic data could potentially overstate actual growth as it
was hard to distinguish if the rebound in indicators, such as
factory output, was merely reinstatement of previously
cancelled orders or a genuine return to growth.
                                
 "Industrial output is recovering after undershooting final
demand but the improving surveys could potentially overstate
actual growth as the economy comes back from the lows of Q1 and
Q2," BNP's senior analyst, Harry Tchilinguirian, said in a
report.
                                
 Analysts said investors would keep a keen watch on some key
economic data due to be released later on Thursday, including
weekly U.S. jobless claims number and August home sales data,
to get more clues on the pace of recovery in the world's
largest energy consumer.
 (Reporting by Fayen Wong; Editing by Clarence Fernandez)