Oil turns lower on expectations of crude oil inventory rise

NEW YORK (Reuters) - Crude oil futures fell on Tuesday as expectations that this week's reports will show U.S. crude inventories rose again countered supportive news of Libyan oilfields being shut.

Prices faltered after being lifted by news the Sarir and the nearby oilfields in Libya were shut by a power cut, dealing another blow to exports from the embattled OPEC member nation.

Greece's euro zone partners approved the Greek government's reform plans, also lending support to oil, but the prospect of another build in U.S. oil inventories highlighted an over-supplied market and countered the supportive news.

"The supply dynamic will be reinforced by the inventory reports and the data are simply too compelling to ignore, and it has consistently undermined the recent rallies," said John Kilduff, partner at Again Capital LLC in New York.

Brent April crude fell 24 cents to settle at $58.66 a barrel, after reaching $60.30. U.S. April crude fell 17 cents to settle at $49.28, off a $50.33 intraday peak.

Ahead of Friday's March contract expirations, a squeeze on benchmark U.S. ultra-low sulfur diesel (ULSD) futures eased on Tuesday.

March ULSD plunged more than 18 cents, sharply reducing its premium to April ULSD.

"The fundamental backdrop is still bearish," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, adding there was a "huge over-supply in the market."

A Reuters survey estimated U.S. crude stocks, already at record levels, rose 4 million barrels last week.

Higher prices for crude further out on the calendar have created an incentive to store crude at the Cushing, Oklahoma, delivery point for the U.S. futures contract.

Scheduled refinery work [REF/US] and the possibility that a strike by U.S. refinery workers might limit production has helped lift Brent's premium to U.S. crude.

The Brent-U.S. crude spread narrowed on Tuesday to $9.38 a barrel based on settlements. It rose to $10.27 on Monday, its widest since March 2014.

Oil prices have started to stabilize around $60 a barrel and demand is showing signs of improving in Asia and other regions, a senior Gulf OPEC delegate said on Tuesday.

OPEC delegates earlier told Reuters that the group had no plans to meet before June, countering a Financial Times report quoting Nigeria's oil minister as saying the country would call an extraordinary OPEC meeting if prices dropped further.

(Additional reporting by Alexis Akwagyiram in London and Jane Xie in Singapore; Editing by Christopher Johnson, Dale Hudson, Peter Galloway and Steve Orlofsky)

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