Oil down as U.S. crude stocks continue surge

NEW YORK (Reuters) - Oil prices fell on Wednesday after U.S. stockpiles hit new record highs and the market could shed more of the rebound seen over the past two weeks that came on expectations of lower output, analysts and traders said.

U.S. crude inventories rose almost 5 million barrels last week, versus a near 4-million-barrel build forecast in a Reuters poll, to reach nearly 418 million barrels, the highest since record keeping began in 1982, government data showed. [EIA/S]

The hefty build was a sign the market was still struggling to find a home for some two million barrels per day of oil which have prevented prices from forming a bottom to a selloff that began in June.

"It proves that the price retracement we had on the capital expenditure cuts and falling rig counts may have been premature," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

Benchmark Brent oil was down $1.60 at $54.83 a barrel by 1:12 p.m. EST (1812 GMT), after setting a session low at $53.91.

U.S. crude was down 95 cents at $49.07, having slid almost $2 earlier.

Both Brent and U.S. crude have rebounded by more than 10 percent since Jan. 29, after a 60 percent rout in seven previous months on worries of a global supply glut.

Kuwaiti Oil Minister Ali al-Omair said on Wednesday prices could rise to $60 a barrel by the end of the year.

But the International Energy Agency believes the market would stabilize at well below the highs of above $100 seen in the last three years.

In Wednesday's session of U.S. crude, the discount between oil for prompt delivery and a year ahead was at $11 a barrel, its biggest in a week. The widening of the spread, known as "contango", was a further sign of near-term market weakness, traders said.

"If a rally takes hold, it will be sold into," said Tariq Zahir, managing partner at Tyche Capital Advisors in Laurel Hollow, New York.

Wall Street bank Goldman Sachs, one of the oil market's most influential voices, reiterated its view that lower prices were needed over the coming quarters to force a slowdown in U.S. crude output that led to the global glut.

"The rig count decline is not sufficient in our view to achieve the slowdown," Goldman said, referring to the three-year low in U.S. oil drilling rigs that sparked the price rebound since late January.

(Additional reporting by Robert Gibbons in New York, Jack Stubbs in London, Meeyoung Cho in Seoul and Adam Rose in Beijing; Editing by Ruth Pitchford, Louise Heavens, Chris Reese and Tom Brown)

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