U.S. crude down as Cushing stockpiles hit record; Brent up

By Barani Krishnan NEW YORK (Reuters) - U.S. crude prices fell 2 percent on Wednesday as stockpiles at the main U.S. delivery point hit record highs amid output cuts by refiners, while Brent rose for the first time in five days after global production cuts suggested by Russia. Inventories at the Cushing, Oklahoma delivery point for U.S. crude futures rose to an all-time high just shy of 65 million barrels, data from the government's Energy Information Administration (EIA) showed. The Cushing build eclipsed a more bullish number from the EIA showing total U.S. crude stockpiles down for the first time in three weeks. Analysts had expected a rise of 3.6 million barrels. [EIA/S] News that several independent refiners including Delta Air Lines' Monroe Energy refinery and Valero Energy Corp are undertaking defensive run cuts to stem losses dealt an additional blow to sentiment. The outages raised concerns that crude processing could slow further from scheduled maintenance works just as space is running out in Cushing tanks. Unusual sales of front-month futures by several refiners were also seen as advance warning of looming, bigger output cuts. "Since we are going into refinery maintenance season, and coupled with Iranian oil coming into the market, any rally will be short-lived," said Tariq Zahir, crude trader and fund manager at Tyche Capital Advisors in Long Island, New York. U.S. crude settled down 49 cents, or 1.8 percent, at $27.45 a barrel. It rallied more than $1 earlier before falling to near 12-year lows on the EIA data, and was choppy through the session due to a weak euro and firm equity markets. [FRX/] [.N] U.K.-based Brent closed up 52 cents, or 1.7 percent, at $30.84 a barrel. It was Brent's first rise since Feb. 2 and came after an 8 percent drop in the previous session. Brent was up early after Russian oil tsar Igor Sechin proposed that producing countries cut output by 1 million barrels per day. Talk that Iran was ready to negotiate with Saudi Arabia on price support also boosted Brent. The drop has squeezed producers' oil income and is having a wider impact. Turmoil in financial markets, in which shares of the world's biggest banks fell steeply this week, is partially caused by the low oil price, the head of BP said on Wednesday. "Of course the turmoil is a big concern," BP Chief Executive Bob Dudley told Reuters. "I've been traveling recently to major consuming countries like Japan and even they say they would like higher oil prices." (Additional reporting by Alex Lawler and Amanda Cooper in London; Editing by Chris Reese and Cynthia Osterman)