U.S. crude hits 3-1/2-mth low below $99 on stocks build

Reuters

* U.S. crude stockpiles grew more than expected in the weekto Oct. 11-EIA

* EIA data shows first draw at Cushing in more than threemonths

* Coming up: U.S. nonfarm payrolls data at 1230 GMT

By Jessica Jaganathan

SINGAPORE, Oct 22 (Reuters) - U.S. crude oil fell below $99a barrel on Tuesday, hitting its lowest since July, with thediscount to European Brent hitting its widest in six months ascrude oil inventories rose more than expected in the world'slargest oil consumer.

Brent crude futures held steady as investors waited for U.S.jobs data that could provide clues on whether the FederalReserve will delay cutting back its monetary stimulus this year,potentially stoking oil demand.

Brent crude oil futures for December delivery wereup 7 cents at $109.71 a barrel at 0246 GMT.

U.S. crude oil futures for November delivery, whichexpire at the end of trade on Tuesday, slipped 26 cents to$98.96 a barrel after earlier hitting $98.85, the lowest sinceJuly 2.

Brent widened its premium to U.S. crude to asmuch as $10.44 on Tuesday, the widest since late April.

"There are a lot of stocks of crude oil in the U.S. and allover the world and there is still a lot of uncertainty on a U.S.economic recovery as there are several issues with the debtceiling," said Ken Hasegawa, a commodity sales manager atNewedge Japan.

"Fundamentally the (U.S. oil) market is not so strong buttechnically WTI could rebound today if the employment data isbetter than expected."

The U.S. jobs data for September was delayed from Oct. 4 bya partial U.S. government shutdown caused by wrangling inWashington over fiscal matters including the debt ceiling.

Analysts polled by Reuters expect nonfarm payrolls to haveincreased by 180,000 in September after a rise of 169,000 jobsin August, with the jobless rate steady at 7.3 percent.

U.S. CRUDE OIL STOCK BUILD

Seasonal refinery maintenance and shifting pipeline flowsaround the key Cushing, Oklahoma, oil hub have helped reverse amonths-long decline in stockpiles, shifting the oil market'sstructure over the past two weeks.

Now, instead of a squeeze in supplies, traders are bettingon a near-term surplus of inventories, at least until refineriesbegin to rev up operations again.

Delayed U.S. government data for the week to Oct. 11confirmed the first decline in Cushing stocks in 14 weeks, whileindustry data suggested the drawdown had continued since then.

Oil inventories at Cushing rose 366,000 barrels to 32.99million barrels, after shedding 17 million barrels since June28, as pipeline bottlenecks were eased, allowing for moremovement of oil out of the hub.

Overall, oil inventories in the country rose by 4 millionbarrels to 374.5 million, more than the increase of 2.2 millionbarrels forecast in a Reuters poll of analysts.

Brent crude oil was supported by a belief that the U.S.Federal Reserve might delay curbing its monetary stimulusprogramme until next year.

A senior Fed official said it would be "tough" for the Fedto have sufficient confidence in the strength of the U.S.recovery by its meeting in December to start reducing its $85billion-per-month bond-buying programme.

The North Sea benchmark also found support from lower globalsupply. Libyan output has fallen sharply and Nigerian output hasbeen repeatedly hit by theft.

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