Oil down 1 percent on glut worry, API cites surprise U.S. crude build

An oil pumpjack is seen in Velma, Oklahoma U.S. April 7, 2016. REUTERS/Luc Cohen

By Barani Krishnan NEW YORK (Reuters) - Oil prices fell 1 percent on Tuesday, extending losses in post-settlement trade after preliminary data showed a surprise U.S. crude stockpile build last week, heightening worries about a global petroleum glut. The market also lost the previous day's upward momentum as speculation fizzled that the Organization of the Petroleum Exporting Countries and other oil producers would embark on another round of talks on price cooperation after their failed effort in April. Trade group American Petroleum Institute (API) reported U.S. crude stockpiles rose by 2.1 million barrels during the week to Aug. 5. Analysts polled by Reuters had expected a 1 million-barrel drawdown instead. The U.S. Energy Information Administration will issue official inventory data on Wednesday (EIA). "To make a significant difference, you need a net draw of 1 or 2 million barrels across the crude, gasoline and distillates balances," said Phil Davis, trader at PSW Investments in Woodland Park, New Jersey. "I think you'll see WTI going back below $40 in the next couple of weeks and fall will likely be a terrible time for oil." WTI, or the West Texas Intermediate benchmark for U.S. crude , settled down 25 cents, or 0.6 percent, at $42.77 a barrel. It fell as much as 55 cents after the release of the API data. More than 16,500 lots of WTI put options for $40 were traded on Tuesday as traders hedged against a potential market tumble. Brent crude settled the session down 41 cents, or almost 1 percent, at $44.98 a barrel. It slid to $44.76 after the API numbers. Just a day ago, oil prices had rallied, with WTI gaining nearly 3 percent, rebounding from last week's selloff when it fell to an April low of $39.19. Analysts and traders have warned of a glut in both crude and refined oil products this summer, pointing particularly to the lag in U.S. gasoline demand despite the peak season for driving in the United States. OPEC's biggest producers have also been pumping near record high levels. In separate data issued on Tuesday, EIA said it expected a smaller decline of 700,000 barrels per day (bpd) in U.S. crude oil production in 2016 than the 820,000-bpd drop it forecast a month ago. It said an uptick in drilling will lead to more output later this year. "The oil market remains in a battle between the trading community which focuses in the shorter term data and information which has been mostly bearish, versus the investment trading crowd which is focused on the medium-to-longer term which is projected to be bullish," said Dominick Chirichella, senior partner at the Energy Management Institute in New York. (Additional reporting by Alex Lawler in LONDON and Osamu Tsukimori in TOKYO; Editing by Marguerita Choy, David Gregorio and Chris Reese)