* EIA reports crude build nearly 1 mln bbls above
expectations
* Build a clear surprise after drawdown cited by API on
Tuesday
* Brent, WTI seesaw, after recent break from range-bound
trade
* Traders see more challenges for oil bulls
(New throughout, updates prices and market activity to
settlement)
By Barani Krishnan
NEW YORK, Oct 7 (Reuters) - Oil fell in volatile trading on
Wednesday, snapping a three-day rally, after U.S. government
data showing a large crude inventory build surprised traders the
day after an industry group had reported a draw.
The U.S. Energy Information Administration (EIA) said
domestic crude inventories rose 3.1 million barrels last week,
more than the 2.2 million-barrel build forecast by analysts in a
Reuters survey. ID:nL1N12713G
Just on Tuesday, preliminary inventory data by the American
Petroleum Institute had suggested a drawdown of 1.2 million
barrels. API/S .
Brent LCOc1 , the global crude benchmark, settled down 59
cents, or 1.1 percent, at $51.33 a barrel.
The West Texas Intermediate (WTI) benchmark for U.S. crude
CLc1 slid 72 cents, or 1.5 percent, to settle at $47.81.
Brent and WTI had gained around 8 percent, or about $4 a
barrel, over the past three days, breaking above a month-long
trading range on technical buying and supportive data.
The rally was partly fueled by an EIA report on Tuesday that
projected global oil demand for 2016 will grow by the fastest
rate in six years, suggesting a crude surplus was easing quicker
than expected. ID:nL1N1260ZH
On Wednesday, crude prices rose as much as $1 early, then
gave all that back to trade a few cents on either side of
break-even.
The crude build reported by the EIA "will take some of the
wind out of the market's sails" and force traders to rethink the
market's direction, said Gene McGillian, analyst at Tradition
Energy in Stamford, Connecticut.
The EIA also reported a near 2 million-barrel gasoline build
that was four times bigger than expected. McGillian likened that
data to pouring "cold water on the market".
Tariq Zahir, oil trader at Tyche Capital Advisors in Laurel
Hollow, New York, predicted that high inventories would keep
weighing on crude prices.
"Overall, we have a real battle going on, with crude
technically having broken out of the range we have been in for
more than a month. $50 for WTI is in sight," Zahir said. "But
fundamentally we are seeing builds and that should continue in
the weeks to come."
He cited impending arrival of Iranian oil as nuclear-related
sanctions against Tehran come off, and an Atlantic hurricane
season that so far has left U.S. oil installations undamaged.
Some traders believed crude was still poised for gains.
"The key technical indicators are positive," said Robin
Bieber, director of London brokerage PVM Oil Associates. "It is
not advised to be short."