UPDATE 9-Oil falls after US gasoline inventories leap higher

Robert Gibbons and David Sheppard
Reuters Middle East

* Gasoline futures slump after EIA reports sharp stock rise

* U.S. distillate stocks up, crude stocks down last week-EIA

* Weak euro zone retail sales, US jobs data weigh on crude

* Coming up: U.S. jobless claims data, 8:30 a.m EST Thursday

(Rewrites throughout; adds EIA annual outlook, Cairo clashes)

NEW YORK, Dec 5 (Reuters) - Oil prices fell by around 1

percent on Wednesday after data showed a huge increase in

gasoline stockpiles in the United States last week, while

disappointing euro zone and U.S. economic figures hurt sentiment

about energy demand.

An increase in production by U.S. refiners helped boost

gasoline inventories by the biggest weekly margin since

September 2001, the Energy Information Administration said, with

stocks rising by 7.9 million barrels.

While U.S. crude oil inventories fell more than forecast,

distillate stocks - which include diesel and heating oil - rose

by more than 3 million barrels.

"The report is solidly bearish and a welcomed development

for consumers," said John Kilduff, partner at Again Capital in

New York.

"The spike in gasoline inventories clears any of the

remaining concerns about supplies from Hurricane Sandy."

Brent January crude lost $1.03 to settle at $108.81

a barrel, having fallen as low as $108.65. The session peak of

$110.57 was a penny below the 50-day moving average.

U.S. January crude closed down 62 cents at $87.88 a

barrel, having swung from $87.46 to $89.05. U.S. gasoline

futures fell almost 2 percent to just below $2.64 a

gallon, while heating oil was down 0.4 percent to near

$2.99 a gallon.

Crude oil prices took some support from a bounce back into

positive territory by stocks on Wall Street, turmoil in the

Middle East, and a remark by U.S. President Barack Obama to

business leaders that a budget deal was possible within about a

week if Republicans compromise on taxes.

But economic data, including a lower-than-expected increase

in U.S. private-sector hiring and a sharp drop in euro zone

retail sales, kept concerns about the global economy in focus.

"It's a stalemate. There was some hopeful data from the U.S.

last week and positive noise from China (this week), but

Europe's a big worry," said Richard Langkemper, an analyst at

Argos North Sea Group in Rotterdam.

The U.S. government's monthly report on nonfarm payrolls is

due on Friday.


Brent crude prices have been underpinned in recent months by

Western sanctions targeting Iran's oil exports and widespread

turmoil in the Middle East, which traders and analysts fear

could spill into key producing countries in the region.

Unrest in the Middle East has partly overshadowed rapid

increases in U.S. domestic oil production in the short term,

even as the world's largest oil consumer targets a move toward

energy independence by the end of this decade.

On Wednesday, clashes erupted in Cairo between supporters of

Egyptian President Mohamed Mursi and protesters over a draft

constitution that has split the most populous Arab nation and

presented the gravest crisis to Mursi's six-month-old tenure.

Egypt's opposition wants the Islamist leader to scrap a Nov.

22 decree that gave him wide powers and shields his decisions

from judicial review. Mursi has shown no sign of buckling,

confident Islamists can win the referendum and a parliamentary

election to follow.


U.S. oil and gas production over the next two decades will

be higher than previously expected, the U.S. EIA said.

In its annual energy outlook, the EIA said U.S. oil

production would hit a peak of 7.5 million barrels per day in

2019 before falling to 6.1 million bpd by 2040. It had

previously forecast a peak of 6.7 million bpd in 2020.

"The growth results largely from a significant increase in

onshore crude oil production, particularly from shale and other

tight formations," the agency said.

Offshore crude oil output will also creep higher as

deepwater and ultra-deepwater portions of the Gulf of Mexico are

brought into production.

"After about 2020, production begins declining gradually ...

as producers develop sweet spots first and then move to less

productive or less profitable drilling areas," the EIA said.

(Additional reporting by Shadia Nasralla and Simon Falush in

London and Ramya Venugopal in Singapore; Editing by Alden

Bentley and Dale Hudson)

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