* U.S. data shows bigger-than-expected crude build
* Gasoline stocks up sharply, hitting futures
* U.S. crude production weighs on market
* China factory growth lowest since July 2016
* Japan's industrial output takes biggest dive since 2011 (New throughout, updates prices, market activity and comments)
By Ayenat Mersie
NEW YORK, Feb 28 (Reuters) - Oil prices fell on Wednesday,after official data showed a larger-than-expected increase inU.S. crude inventories and a surprise build in gasoline stocks.
U.S. crude inventories rose by 3 million barrels for theweek ending Feb. 23, compared with analyst expectations for abuild of 2.1 million barrels. Gasoline stocks also rosesurprisingly. EIA/S
"We had another pretty sizable build, and with that it kindof seemed like this recent bull market had the carpet pulled outfrom underneath it," said Phillip Streible, senior marketstrategist at RJO Futures in Chicago.
Brent crude futures fell for a second day after rising 6straight sessions.
U.S. West Texas Intermediate crude CLc1 fell $1.37, or2.17 percent, to settle at $61.64 a barrel. Most-active Brentcrude futures LCOv1 for delivery in May were down $1.79, or2.7 percent, to settle at $64.73 a barrel.
The April contract LCOc1 settled down 85 cents, or 1.28percent, at $65.78 a barrel ahead of expiration.
Prices briefly pared losses after the U.S. EnergyInformation Administration released data showing crudeproduction in December dipped to 9.95 million barrels, down108,000 barrels per day (bpd) from November.
Prices resumed their downward path after that report, inwhich the EIA also revised its November crude production figuresupward to a record 10.057 million bpd. EIA/PSM
"The market did attempt a late day rally but because it'sthe end of the month, a lot of hedge funds decided to try andtake some profits," said Phil Flynn, analyst at Price FuturesGroup.
Soaring U.S. production, which has risen by a fifth sincemid-2016, has kept a lid on oil prices this year, even as OPEChas maintained its supply cuts. got a lot more oil to produce and we'll be throughthat 11 million barrel-per-day threshold much sooner thanexpected," said Streible.
The entire energy complex was led lower by gasoline futuresafter a surprise build in U.S. gasoline stocks, which rose by2.5 million barrels, compared with expectations for a190,000-barrel drawdown. The most active U.S. gasoline futures RBc2 fell as much as 3.1 percent to $1.9354 a gallon.
The rise in inventories came even as refineries boostedactivity in the most recent week.
"In spite of refiners undergoing maintenance, they continueto process more crude compared to previous years adding togasoline and diesel supply," said Andrew Lipow, president atLipow Oil Associates in Houston.
The market was also pressured by the rising dollar and stockmarkets, said Flynn. Equities markets weakened on Wednesday,while the U.S. dollar .DXY hit a one-month high. A strongerdollar makes oil more expensive for holders of other currencies.
Prices were pressured earlier after three of the world's topcrude consumers- China, India and Japan - reported a slowdown inmonthly factory activity. vs Saudi vs U.S. oil production
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