* U.S. September crude contract volatile ahead of expiration
* U.S. crude stocks drop 4.5 million barrels-EIA
* EIA says U.S. gasoline stocks up, distillates down
(Updates prices to settlement, adds comment)
By Anna Louie Sussman
NEW YORK, Aug 20 U.S. crude oil rose in choppy
trading on Wednesday ahead of the September contract's
expiration and after government data showed crude stocks in the
United States fell sharply last week.
Front-month October Brent and U.S. October crude saw more
modest gains, as Brent recovered after falling to a 14-month low
U.S. crude stocks slid by 4.5 million barrels last week, the
U.S. Energy Information Administration (EIA) said, more than
analysts had expected. Stocks in Cushing, Oklahoma - the
delivery point for the U.S. crude contract - rose by 1.76
Gasoline stocks rose 585,000 barrels against expectations
for a drop while distillate stocks fell 960,000 barrels,
slightly more than forecast.
Brent crude for October delivery rose 72 cents to
settle at $102.28 a barrel. The contract touched $101.07 on
Tuesday, its lowest since June 26, 2013.
The expiring U.S. September crude contract rose $1.59
to settle at $96.07. The more actively-traded October crude
rose 59 cents to settle at $93.45, with its discount to
Brent CL-LCO1=R above $9 intraday, the widest spread since
U.S. crude futures, also known by their West Texas
Intermediate benchmark or WTI, have been pressured by growing
supplies of light-sweet oil from booming North American output,
hitting a seven-month low of $94.26 on Tuesday.
The sharp drop in crude inventories showed that refineries
are taking advantage of an arbitrage in diesel exports from the
Gulf Coast to ramp up their refinery activity, said Stephen
Schork, editor of The Schork Report in Villanova, Pennsylvania.
"Down in the Gulf Coast the refineries are running the heck
out of it. They're probably pushing their scheduled maintenance
back to maximize the current margins," he said.
September WTI rose by nearly $2 a barrel intraday on
Wednesday as traders bought back short positions ahead of the
September's premium to the October contract reached $3.12 on
Wednesday, the largest price difference between the front and
second month contracts CLc1-CLc2 since 2009.
"There has been some outsized volatility over the past
several sessions," said John Kilduff, partner at Again Capital
LLC in New York, noting that traders were closely watching
pipeline flows into and out of Cushing.
He added that the September contract was "starved for
liquidity," making it easy to push around.
U.S. September RBOB gasoline futures were up only
0.60 cent at $2.7014, having retreated from its $2.7349 a gallon
peak notched ahead of the EIA data.
ATLANTIC BASIN GLUT
Brent firmed as traders said a 12 percent slide since June
might be overdone. Brent had fallen by more than $13 a barrel in
two months as increased output of light sweet crude created a
glut in the Atlantic Basin.
Fears that violence in Iraq would slash output have not
materialized and Libya's output has also risen despite fighting
between rival militias.
"The returning oil supply from Libya is flooding a market
that is already amply supplied," said Carsten Fritsch, a
commodity analyst at Commerzbank in Frankfurt.
"There is thus growing pressure on the other OPEC producers
to scale back their supply so that the oversupply does not
become excessive," he said.
(Additional reporting by Robert Gibbons in New York, David
Sheppard in London and Manolo Serapio Jr. in Singapore; editing
by David Clarke, G Crosse, David Evans and Andrew Hay)