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Oil ends down 2 percent, market refocused on global supply glut

An off-shore oil drilling platform is seen under construction at a plant in Qingdao, Shandong province, China, November 1, 2015. REUTERS/Stringer

By Barani Krishnan

NEW YORK (Reuters) - Crude oil futures settled down more than 2 percent on Tuesday, resuming their slide after a one-day pause, on bets U.S. inventories rose for an eight straight week.

In post-settlement trade, oil pared losses after industry group American Petroleum Institute (API) said U.S. crude stockpiles fell last week by 482,000 barrels due to lower imports and higher refinery runs.

Before the API report, a Reuters poll of analysts forecast a build of almost 2 million barrels in U.S. inventories for the week ended Nov. 13, bringing crude stockpiles to near April's record highs above 490 million barrels.[EIA/S]

The poll came ahead of official inventory data due on Wednesday from the U.S. government's Energy Information Administration (EIA).

While the API report showed a draw in total U.S. crude stocks, the group said inventories at the Cushing, Oklahoma, delivery hub for U.S. crude futures rose by 1.3 million barrels. Large rises in Cushing stocks often tend to weigh on crude prices.

U.S. crude's West Texas Intermediate (WTI) futures (CLc1) settled down $1.07, or 2.6 percent, at $40.67 a barrel. U.S. crude pared losses after the API data, trading 65 cents lower at $41.09 by 4:48 p.m. EST (214 GMT).

Brent crude futures (LCOc1) settled down 99 cents, or 2.2 percent, at $43.57 a barrel. In post-settlement trade, it was 56 cents lower at $44.00.

Most traders and analysts expect the two benchmarks to fall further in anticipation of higher crude builds in the coming weeks.

Brent is less than $2 away from its 6-1/2-year bottom of $42.23 set in August. U.S. crude fell to a March 2009 low of $37.75 in August.

"We still see a test of the late August WTI lows as a 85-90 percent probability," said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates, citing selling pressure from "short-term oriented traders".

WTI futures have been under $50 longer now than they were during the height of the financial crisis in 2008/2009.

Options on U.S. crude expired on Tuesday, with open interest mostly gathered around put options, which give the seller the right, but not the obligation, to sell WTI at both $40 and $45 a barrel. <0#CLc1>

Brent's premium over U.S. crude (CL-LCO1=R) narrowed to below $2 a barrel, versus the nearly $4 level at the start of November. A narrower spread between the two tends to encourage a greater flow of oil from abroad into the U.S. market, as crude grades pegged to the pricier Brent become more affordable.

(Additional reporting by Amanda Cooper in London and Henning Gloystein in Singapore; Editing by Meredith Mazzilli, David Gregorio and Andrew Hay)