By Alden Bentley and Ronnie Cohen SAN FRANCISCO, Sept 10 (Reuters) - America's Cup defending champion Oracle Team USA called off one of its races in the competition on Tuesday after Emirates Team New Zealand trounced them, giving the Kiwis a fourth victory In the series. Oracle appeared shell-shocked and asked for a postponement of the second match of the day in San Francisco Bay. Both teams have the right to delay one race in the 17-race series for the world's oldest sporting trophy. "We need to up our game," skipper Jimmy Spithill said. "We're going to go away and make sure we do what we need for the next one." Oracle faces an uphill battle, having started the regatta with a two-race penalty and without its first-choice wing-sail trimmer, Dirk de Ridder. An international jury punished the team for illegally modifying its smaller, 45-foot practice catamarans in a preliminary regatta. The unprecedented cheating penalty means that Oracle must win 11 races to keep the Cup. On Tuesday, the team backed by software billionaire Larry Ellison's won the race start and cruised in its 72-foot catamaran past government-backed New Zealand for the first two legs of the five-leg heat. Then Oracle tried to do something never been done - to lift its foils out of the water while tacking. It failed, and the Kiwis rushed past and commanded a lead of nearly a mile. Oracle gave up its more than one minute lead to eventually lose the race by 65 seconds. "It's working for us," Kiwi skipper Dean Barker said after the race. "We have plenty to work on, but it was encouraging to get back in the race." Emirates Team New Zealand won three of the first four races. But, after a shaky start, Oracle Team USA charged back with a vengeance on Sunday, leading much of the third duel, winning the fourth and emerging as a formidable foe. The radical 72-foot catamarans look evenly matched then and the racing has been more exciting than many expected, featuring dramatic starting maneuvers, near collisions, lead changes and closely fought tacking duels. The cheating scandal, quarrels over rules and grief over the death of a sailor during a training exercise took center stage during the preliminaries, when a promised "summer of racing" to determine which yacht could take on Oracle fizzled into a lopsided series with powerhouse Team New Zealand dominating. Now the TV network-dubbed "September Showdown" is delivering high-adrenaline, edge-of-the seat racing in San Francisco Bay's natural amphitheater. Flag-waving fans have watched in awe along the waterfront as giant twin-hulled yachts with three-story tall wing sails cross within inches of one another. The yachts look like airplanes flying when their foils lift the hulls out of the choppy water. With 11 sailors on board, the yachts have cruised as fast as 53 miles an hour around the five-leg race course, starting near the Golden Gate Bridge, sailing past Alcatraz Island and finishing against the backdrop of the San Francisco Bay Bridge. Ellison and his crew desperately want to keep the Cup. But the Kiwi team has vowed to bring the Auld Mug, as they call it, back to its Royal New Zealand Yacht Squadron. Team New Zealand held the trophy from 1995 until 2003 with the Kiwi sailor Sir Russell Coutts at the helm. He now runs the Oracle Team USA. The 51-year-old Olympic gold medalist has won the America's Cup four times, twice for his homeland. New Zealand lost the trophy in 2003, when Coutts jumped ship to Alinghi, a yacht sailing under Geneva's flag. After Ellison hired away Coutts, he won the Cup for the fourth time in 2010 in Valencia, Spain. Ellison chose the 72-foot catamarans as the boats and his home waters of San Francisco Bay as the venue for this year's competition. Critics complained that the boats were too fragile and hard to handle after Olympic gold medalist Andrew Simpson of Britain was killed in a May training exercise for Sweden's Artemis Racing. But this week's thrilling racing has radically shifted the conversation.