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London: Oil fell yesterday, for a second straight session, as a US government report showed larger-than-expected increases in inventories of gasoline and distillates.
The US government's Energy Information Administration (EIA) said gasoline stocks rose by 2.9 million barrels last week against forecasts of a 300,000 barrels build.
Stocks of distillates, which include diesel, rose by 2.4 million barrels when they had been forecast to rise by 2.3 million barrels. "This looks like another pretty bearish report with a large build in distillates and gasoline... People are not driving as much, it looks like consumers are slowing demand," said Rob Kurzatkowski, futures analyst at OptionsXpress in Chicago.
US crude for September fell $1.78 at $126.64 by 1457 GMT, off lows of $125.31, the lowest since June 5.
Brent crude was $1.95 lower at $127.60.
The build of refined products stocks in the US, the world's biggest energy consumer, overshadowed a larger than expected decline in crude oil stocks, which fell by 1.6 million barrels against forecasts of a 0.7 million barrel draw.
Earlier in the session, oil fell as concern eased that Hurricane Dolly would hit Gulf of Mexico crude supply.
The drop also coincided with a firmer dollar, which may have reduced the appeal of commodities to some investors, analysts said. The dollar hit a two-week high against the euro yesterday.
Analysts who chart past price movements to predict future direction said the market could head lower for now, given that the next area of support is around $120 to $122 a barrel for US crude.
"In addition to Dolly's likely fade into oblivion, we suspect that crude's technicals are not helping matters much either," analysts at MF Global said in a report.
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