UPDATE 10-U.S. crude settles at 6-month low, Brent also languishing
(Updates prices to settlement, rewrites throughout)
By Lorenzo Ligato
NEW YORK Aug 6 (Reuters) - Oil prices fell on Wednesday as abundant supplies in the United States drove the U.S. contract to its lowest close in six months, while Brent prices floundered near nine-month lows.
Prices saw some early support from a U.S. government report showing that U.S. crude inventories fell 1.8 million barrels last week and gasoline stocks dipped sharply. But the oil drop was smaller than the one reported by the American Petroleum Institute on Tuesday and not large enough to stem a recent drop in prices prompted in part by ample domestic stockpiles.
Crude stocks at Cushing, Oklahoma, the delivery hub for the U.S. crude contract, rose by 83,000 barrels, which also pressured prices.
"The general trend is definitely downwards," said Tariq Zahir, an analyst at Tyche Capital Advisors in New York. "Cushing stocks got to a point were they can't go down much further. If we continue to see a build, that could open the floodgates to even lower prices."
U.S. crude for September delivery lost 46 cents to settle at $96.92 a barrel, its weakest settlement since Feb. 3.
Brent crude oil lost 2 cents settle at $104.59 a barrel, its lowest close since Nov. 7.
The spread CL-LCO1=R between the two benchmarks closed at $7.67.
Both Brent and U.S. crude had a modest rebound shortly after the release of the EIA data, as an unexpectedly steep drop in gasoline stocks, which fell 4.4 million barrels, pointed to stronger demand for gasoline in the United States.
The drop in U.S. inventories came after upbeat U.S. economic data this week showing a spike in service-sector activity to a nine-year high and a surprisingly large increase in factory orders, possible signs of better oil demand to come.
But the rebound halted in the afternoon and both benchmarks pared gains shortly after reports emerged that near 100 rail-cars arrived at the Stroud, Oklahoma unloading facility on Wednesday, the first train to arrive this month at the terminal connected to Cushing.
Oil prices have fallen more than $10 a barrel over the past six weeks, as global supply has exceeded demand, building up a glut in the Atlantic Basin and Asian markets.
Despite prolonged violence in several key oil-producing regions, traders have become increasingly nervous about weak seasonal demand and poor refinery margins in a global market that is well supplied with high quality, light crude oil.
Yet, geopolitical risk continues to bubble under the surface, with escalating tensions in Libya, Iraq and Russia.
"Worries over Russia's intentions in Ukraine are limiting factors for oil prices today, but the fact remains that any escalation in tensions with Russia put substantial volumes of oil supply at risk," said Tim Evans, Energy Futures Specialist at Citi in New York.