Oil drops as US stockpiles rise

Shafaq News / Oil prices fell for a third day on Wednesday, dragged down by a larger-than-expected crude and gasoline stockbuild in the U.S. and easing supply concerns.

Brent futures declined by 30 cents, or 0.35%, to $85.52 a barrel at 0405 GMT, while U.S. West Texas Intermediate crude slipped 42 cents, or 0.50%, to $83.07 a barrel.

Both benchmarks have given back most early-week gains after falling more than 2% in the previous session.

U.S. crude oil stockpiles swelled by about 12.9 million barrels, according to market sources citing American Petroleum Institute figures on Wednesday.

This was much higher than the 500,000-barrel gain expected by analysts in a Reuters poll.

"Unlikely to help sentiment this morning are API inventory numbers...Lower refinery run rates due to maintenance likely contributed to this build," said ING analysts in a client note.

Gasoline inventories also rose by 3.6 million barrels, the data showed, a stark contrast from the 800,000-barrel drop expected by analysts and continued to stoke worries of slowing fuel demand in the U.S.

"Fuel prices may be closer to consumers' pain threshold than inflation-adjusted prices might suggest. There are already signs that consumers have responded by cutting back on fuel consumption," JP Morgan analysts said in a client note.

"In PADD 5, of which California is the biggest consumer, we estimate gasoline demand dropped 100,000 barrels per day between June and September, to a seven-month low of 1.46 million barrels per day," they added.

Markets will be awaiting further inventory data cues from the U.S. Energy Information Administration (EIA) due later in the day at 1500 GMT.

Elsewhere, market concerns on the supply situation in the Middle East continued to ease, putting downside pressure on prices.

(Reuters)