* Oil off highs on surprise build in U.S. gasoline stocks
* U.S. crude stocks rise more than expected
* Iran test fires 9 missiles
(Recasts with U.S. data, updates prices)
LONDON, July 9 (Reuters) - Oil handed back early gains to
stand beow $136 a barrel on Wednesday as U.S. government data
showed an unexpected increase in gasoline stocks, overshadowing
a larger-than-expected fall in crude inventories.
U.S. light crude for August delivery <CLc1> fell 50 cents at
$135.54 a barrel by 1530 GMT, off highs of $138.28. London Brent
crude <LCOc1> was 3 cents down at $136.40.
The U.S. Energy Information Administration said crude stocks
fell 5.9 million barrels last week against expectations of a 1.8
million decline, while gasoline stocks rose by 900,000 barrels
against expectations of a decline of 200,000 barrels. []
"It is a very bullish report with a little bearish news
hidden in there," said Rob Kurzatkowski, futures analyst at
optionsXpress in Chicago. "Gasoline is the weak link in the
chain."
The U.S. data also showed a 2.1 percent year-on-year drop in
gasoline demand for the past four weeks, alongside a 1.8 percent
drop in total product demand.
IRAN
Crude had rallied by more than $2 earlier in the session,
partly recouping a hefty $5 drop in the previous session, after
Iran said it had test-fired missiles that could reach Israel and
U.S. bases in the region.
Iran's missile tests at a time of increased tensions over
its nuclear programme once again highlighted the geopolitical
risks in the oil market.
"Of particular concern is the fact these missiles are not
simply short to medium range," said Global Insight analyst
Lawrence Poole.
Iran's state media reported the test-firing of nine long and
medium-range missiles, including one Tehran has previously said
could reach Israel and U.S. bases in the region. []
Iran, the second-largest oil producer in the Organization of
the Petroleum Exporting Countries, says its nuclear programme is
for power generation, whereas the West fears it is aimed at
making bombs.
Amid an escalating war of words with Israel, an aide to
Iran's Supreme Leader was quoted on Tuesday as saying that Iran
would hit Tel Aviv, U.S. shipping in the Gulf and American
interests around the world if it was attacked. []
Fresh concerns over supplies resurfaced after Libya said its
output would fall by about 100,000 barrels per day starting the
next few days due to maintenance on a pipeline.[]
Oil is up 42 percent this year, boosted in part by investors
seeking a hedge against inflation and the weakening dollar, or
fleeing a downturn in equity markets.
(Reporting by Angela Moon in Seoul and Santosh Menon in
London; editing by James Jukwey)
