Oil drops 2 percent on swelling U.S. inventories

By Matthew Robinson

NEW YORK (Reuters) - Oil fell 2 percent on Wednesday as U.S. gasoline stocks rose and crude inventories hit a nine-year high, easing supply concerns in the world's top consumer.

London Brent LCOc1 crude settled down $1.42 to $70.42 a barrel after falling as low as $69.56 earlier. Brent had rallied to a 10-month high of $72.25 on Monday on worries of disruption of supplies from OPEC member Nigeria.

U.S. oil CLc1 gave up 91 cents to $68.19 a barrel after government data showed U.S. crude inventories jumped 6.9 million barrels last week to the highest levels since May 1998 and eclipsing analyst expectations of a 100,000 barrels build.

Gasoline stocks, meanwhile, rose 1.8 million barrels, almost double the market forecast, even as refinery utilization fell unexpectedly in the midst of peak U.S. driving season demand.

"The completely unexpected build in crude stocks is the surprise of the day. And it is very bearish," said Tim Evans, analyst at Citigroup Global Markets.

Oil was down earlier after a general strike in Nigeria had yet to affect oil shipments from the eighth-largest exporter, although fears arose later the strike could soon start to bite.

Unions spared oil production and exports on the first day of the indefinite strike, but threatened to withdraw key staff of sector regulator, the Department of Petroleum Resources (DPR), from oil fields and export terminals by midnight on Wednesday.

"If by tomorrow the situation has not changed, we will pull out members in DPR who are still at the export terminals. When DPR is not there, there will be no export," said Peter Akpatason, head of the NUPENG oil union. nL20302990