* Oil turns lower with equities
* 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
below $72 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 20 cents to $71.85 a
barrel by 1147 GMT, after falling $2.32 on Tuesday. Earlier on
Wednesday, prices had recovered to $72.64, before turning lower.
Brent crude <LCOc1> fell 2 cents to $71.80 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. []
"A lot of people are expecting a build in crude stocks
because last week's draw was large," said Tony Nunan, risk
manager at Mitsubishi Corp.
"People are holding stocks offshore and sooner or later
these would show in crude stocks in the U.S."
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.
Nunan noted that while the figures from industry body API
have occasionally diverged from those of the government Energy
Information Administration (EIA), due out at 1430 GMT on
Wednesday, the two have been consistent for the last two weeks.
PRICING IN A RECOVERY?
Oil prices were torn between a dip in equities and weakness
in the 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.
European shares fell on Wednesday, snapping a four-session
winning streak despite Ifo's closely-watched survey of German
business morale showing a bigger-than-expected improvement.
[]
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 Ramthan Hussain in Singapore; editing
by William Hardy)
