* Prices hit technical resistance after rally to above $40
* U.S. crude stocks seen hitting 5th week of record highs
* Uncertainty over Fed policy also keeps markets on edge
(New throughout, updates prices and market activity)
By Barani Krishnan
NEW YORK, March 15 (Reuters) - Oil fell 3 percent on
Tuesday, extending losses for a second straight day, as market
participants cited technical resistance after prices ran above
$40 a barrel and worry that U.S. crude stockpiles had continued
to rise despite falling production.
Uncertainty over how the Federal Reserve will word its
policy statement on Wednesday also fed jitters in financial
markets despite expectations the U.S. central bank will signal a
slower pace of interest rate hikes. MKTS/GLOB
Crude had rallied about 50 percent over the past six weeks
as talk that major oil producers planned to freeze output at
January levels boosted a market that sank to 12-year lows on a
supply glut.
But after soaring to three-month highs of more than $41 a
barrel on Brent and above $39 on U.S. crude last week, the rally
had hit technical fatigue, analysts said.
U.S. government data on Wednesday was expected to show crude
inventories at record highs for a fifth week in a row even with
shale oil production down. EIA/S
A production freeze plan by OPEC and Russia has made little
progress, with No. 4 oil producer Iran still determined to
double or restore its crude exports to pre-sanction levels
before limiting any output. OPEC/O
"The rally is now retreating on fears that OPEC will
continue to flood the market with oil in a world where demand
may falter," said Phil Flynn, analyst at the Price Futures Group
in Chicago.
Brent LCOc1 was down $1.10, or 2.6 percent, at $38.43 a
barrel by 11:49 a.m. EDT (1549 GMT).
U.S. crude CLc1 was off $1.21, or 3 percent, at $35.97 a
barrel.
U.S. gasoline futures, also known as RBOB RBc1 , fell for a
second straight day too, sliding 2 percent to $1.3970 a gallon.
"The rot is setting in," technical analysts at PVM
Associates in London said in a commentary, citing potential
threat to support for Brent at $38.34 and for U.S. crude at
$36.04. They also noted RBOB's failure to hold above the
eight-day moving average of $1.41.
But some said the market appeared to be pacing the slide and
it was too early to call the rally over.
"While the advance in crude oil prices has paused, I think
the bears might have been hoping for a larger reaction to the
downside," said David Thompson at Washington-based commodities
brokerage Powerhouse. "If prices were to break below $35, then
my view would turn more bearish."