Brent falls as Nov contract expires, U.S. crude higher

A worker holds up a fuel pump nozzle after filling up the tank of a car at a petrol station in Cairo October 3, 2012.

NEW YORK (Reuters) - Brent crude prices fell on Tuesday as the front-month November contract expired ahead of weekly inventory reports expected to show U.S. crude oil inventories rose last week.

Expiring November Brent retreated only after reaching a four-week high above $116 a barrel and after Brent's premium to U.S. crude advanced to $24.28, the highest since October 2011.

U.S. crude seesawed most of the day, but managed a higher settlement, receiving support from a rally on Wall Street and from a weaker dollar. .N

Brent and U.S. crude received a boost early when the euro reached a one-week peak against the U.S. dollar on speculation Spain may seek a bailout and end the uncertainty about its intentions. <USD/>

A German ZEW index of investor sentiment rose for a second straight month in October, news that was also seen as giving support to the euro and crude futures.

But rising U.S. crude oil stockpiles and concerns about economic growth in Europe and China kept curbing bullish sentiment.

"Crude got a temporary boost on the expectations that Spain will ask for a bailout, and end the uncertainty, but the consensus is that inventory numbers are going to be bearish," said Phil Flynn, analyst at Price Futures Group in Chicago.

Expiring Brent November crude fell 73 cents to go off the board at $115.07 a barrel. It reached $116.20, the highest for Brent since prices hit $117.02 on September 17.

Brent December crude fell 40 cents to settle at $114 a barrel, trading from $113.48 to $114.87.

U.S. November crude rose 24 cents to settle at $92.09 a barrel, trading from $91.30 to $92.32. The U.S. November crude contract expires on October 22.

Brent's premium to U.S. crude fell back and ended at $22.98 a barrel, based on November settlements, after scaling $24 during the session.

Maintenance-curbed North Sea production and the threat that escalating conflict in Syria could drag neighboring states into the turmoil have recently helped propel Brent's premium to its U.S. counterpart, along with the long-running dispute between the West, Israel and Iran concerning Tehran's nuclear program.

U.S. heating oil and RBOB gasoline futures also saw choppy trading. Heating oil eased 1.06 cents to $3.1985 a gallon, while gasoline dipped half a cent to $2.8453 a gallon.

RISING U.S. CRUDE STOCKS

U.S. crude stocks rose 3.7 million barrels last week, according to a report released late on Tuesday by industry group the American Petroleum Institute. The build, reflecting a boost in imports, was 2 million barrels more than analyst expectations. <API/S>

U.S. distillate stocks rose 1.8 million barrels, while gasoline stocks fell 1.2 million barrels.

After inventories rose more than forecast in the week to October 5, U.S. crude stocks were expected to have increased 1.7 million barrels last week, a Reuters survey of analysts showed.

Gasoline stockpiles were expected to edge up 500,000 barrels, according to the survey, but distillate stocks were expected to have fallen 1.2 million barrels.

The government's report from the U.S. Energy Information Administration (EIA) will follow on Wednesday at 10:30 a.m. EDT (1430 GMT).

U.S. retail gasoline demand last week was down 3.1 percent compared with a year earlier as higher pump prices curb demand, a biweekly report from MasterCard said.

Adding to the improved supply picture, Saudi Arabia pumped around 9.77 million barrels a day (bpd) of crude oil in September, an industry source said on Monday.

According to official Saudi government figures supplied to OPEC, the world's biggest oil exporter produced 9.75 million bpd in August and 9.8 million bpd of crude in July.

A Reuters analysis of U.S. import data shows sales to the world's top oil consumer have dipped only slightly even with an unexpected six-month outage at Saudi Aramco's joint venture refinery in Texas and a fire at a Chevron Corp refinery near San Francisco.

U.S. crude imports from Saudi Arabia hit a four-year high of 1.425 million barrels per day in the first seven months of 2012, and have dipped only 130,000 bpd since then.

"Fundamentally there is no shortage of oil, with Saudi Arabia and others maintaining high output while inventory levels are also good," said Ken Hasegawa, a commodity sales manager with Newedge in Tokyo.

"On the other hand, there is tension in the market with what is happening in Iran and the Turkey-Syria issue. That has put a floor on prices."

(Additional reporting by Peg Mackey in London and Manash Goswami in Singapore; Editing by Marguerita Choy, Peter Galloway and David Gregorio)