* U.S. crude stocks up 3.5 million barrels -API
* U.S. dollar hits 8-week high
* Some Ukraine-Russia gas dispute issues "can't be solved" -
* Marathon's Garyville refinery partially shut
* Coming up: EIA report at 1100 EDT (1500 GMT) on Thursday
(Adds API data)
By Elizabeth Dilts
NEW YORK, May 28 U.S. crude fell more than $1 a
barrel on Wednesday as traders took profits ahead of a
government inventory report that is expected to show a build in
crude stocks, while Brent edged lower, propped up by
geopolitical tensions in Ukraine and Libya.
U.S. commercial crude oil inventories rose 3.5 million
barrels last week, the American Petroleum Institute (API) said,
versus a Reuters poll that forecast a build of 500,000 barrels.
The industry group's data also showed a 1.5-million-barrel
draw at the Cushing, Oklahoma delivery hub, and a 1.4
million-barrel-draw on gasoline stocks in the week to May 23,
which could be supportive for prices.
Traders await the U.S. Energy Information
Administration's(EIA) official report at 1100 EDT (1500 GMT) on
An uneasy calm returned to Donetsk in eastern Ukraine after
government forces killed dozens of rebel fighters earlier this
But traders were not reassured as the European energy
commissioner said it is unlikely Kiev and Moscow will resolve
all issues in the gas price dispute before Sunday's June 1
"This is profit-taking ahead of the EIA and API reports,"
said Bill Baruch, senior market strategist at iitrader.com in
Chicago. "With regards to Ukraine, there is a positive aspect in
that there is some light at the end of the tunnel. But as
fighting picks up, there is worry about the gas supply and this
is going to directly affect Brent."
U.S. oil settled down $1.39 at $102.72 a barrel, and
Brent fell 21 cents to settle at $109.81 a barrel.
Libyan oil output shrank again because an armed group
disrupted operations at Hariga port.
However, Libya's turmoil has largely been priced in, traders
said. They were focused instead on U.S. economic data from
Tuesday showing an unexpected rise in long-lasting manufactured
orders in April and a boost in consumer confidence in May.
The data helped push the U.S. dollar to an eight-week
high and made commodities like oil, which are priced in dollars,
Marathon Petroleum said its 522,000 barrels-per-day
(bpd) refinery in Garyville, Louisiana, was partially shut due
to a windstorm. That put more pressure on crude prices.
U.S. gasoline futures settled 1.07 cents up at
$3.0059 a gallon, having risen from an intra-session low of
$2.9812 a gallon after the Marathon refinery shutdown was
Also weighing on oil prices, European and U.S. equities
eased after two days of record highs.
Investors' appetite for equities has been supported by
recent strong U.S. economic data and expectations of monetary
easing by the European Central Bank, while the yield on the
benchmark U.S. 10-year Treasury note touched below
2.46 percent, its lowest level since July.
(Additional reporting by Robert Gibbons in New York, Lin
Noueihed in London and Manash Goswami in Singapore; Editing by
Louise Ireland, David Evans, Marguerita Choy, Andrew Hay and