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Oil down 2% on IEA warning, fear of US stockpile rise

[NEW YORK] Oil prices fell 2 per cent on Wednesday after the International Energy Agency (IEA) said a global supply glut was threatening market recovery and investors braced for a possible rise in US inventories.

The IEA, which advises industrialized nations on energy policies, said crude stockpiles kept rising last month, pushing floating storage to the highest level in seven years.

"(Stocks) are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices," the Paris-based group said in a report.

Brent crude was down US$1, or 2.1 per cent, at US$47.47 a barrel by 9:48 am EDT (1348 GMT).

US crude slipped by 80 cents, or 1.8 per cent, to US$46.

Both benchmarks rose nearly 5 per cent on Tuesday for their largest daily gain in three months before trade group American Petroleum Institute (API) reported a surprise crude inventory build of 2.2 million barrels for last week.

The API also cited an unexpected rise of 1.5 million barrels in gasoline and 2.6 million in distillates, that include diesel, for the week to July 8.

A Reuters poll of oil market analysts has forecast instead a drawdown of 3 million barrels in crude, a drop of 400,000 barrels in gasoline and rise of 300,000 barrels in distillates.

The US government's Energy Information Administration will issue official inventory data at 10:30 am EDT (1430 GMT).

"If we don't draw more than 2 million barrels east of the Rockies, I would expect another move under US$45," Scott Shelton, broker with ICAP in Durham, North Carolina said.

A large crude build could spark a selloff breaching the 100-day moving averages of US$45.06 for Brent, Shelton added. US crude has already breached its 100-day moving average of US$46.26, hitting US$46.07 earlier on Wednesday.

Jim Ritterbusch of Chicago-based oil markets consultancy said US gasoline futures, also known as RBOB, will likely fall more than crude in the event of a large stock build, with refining margins, called cracks, particularly under pressure.

"RBOB will revive its role as downside leader in the complex, in contributing to weakening in the NYMEX crack differentials into new low territory," he said.