September 17, 2014 / 5:17 PM / 5 years ago

UPDATE 8-Oil prices fall on EIA report of big U.S. crude stocks build

* U.S. crude stocks build 3.7 mln barrels last week -EIA

* Libya’s El Sharara field shut after tank damage (Rewrites lead, adds Fed statement, analyst comment, updates prices to settlement)

By Robert Gibbons

NEW YORK, Sept 17 (Reuters) - Crude oil futures fell on Wednesday after a government report showed crude stocks rose sharply in the United States last week and as a strong dollar continued to create headwinds for dollar-denominated commodities.

U.S. crude stocks rose 3.7 million barrels last week, against expectations for a drop, the Energy Information Administration said, as refineries cut capacity utilization and imports jumped.

Brent November crude slipped 8 cents to settle at $98.97 a barrel, recovering from an intraday low of $98.51.

U.S. October crude fell 46 cents to settle at $94.42, falling intraday to $93.74.

“It looks like we’ve got extra oil hanging around - that was the initial shock of the number,” said Phil Flynn, an analyst at the Price Futures Group in Chicago.

“The number indicates the imports were pretty darn good last week, (which) may be in part because we had a pretty strong dollar situation, I think that’s why the number was so big.”

The recent strength of the dollar has been a significant headwind for oil, as it makes commodities priced in dollars more expensive for buyers using other currencies.

Brent and U.S. crude initially extended losses after the Federal Reserve’s policy statement on Wednesday renewed a pledge to keep U.S. interest rates near zero for a “considerable time” but issued projections that suggested the central bank may raise borrowing costs a bit quicker than it had been thinking a few months ago.

“The recent dollar strength and commodity weakness from that strength should continue, as a result,” said John Kilduff, partner at Again Capital LLC in New York.

Crude prices rose on Tuesday when Abdullah al-Badri, the Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), said that the group could trim its 2015 output target by 500,000 barrels per day (bpd).

On Wednesday, others in OPEC were cautious. It was too early to say and the group may not need to cut its oil output target at its meeting in November, a Gulf OPEC delegate and other OPEC sources said, as stronger demand in the Northern hemisphere winter should support oil prices.

Many OPEC countries need oil prices above $100 a barrel to meet budget needs and analysts say Saudi Arabia, OPEC’s biggest producer, could cut in an effort to support prices. Any OPEC cut would be the group’s first since 2008.

“It makes sense for Saudi Arabia to curb supply,” Michael Poulsen, oil analyst for A/S Global Risk Management, said.

Libya’s El Sharara field was shut after a tank was damaged at the Zawiya refinery, which the field supplies, in fighting between armed groups, an oil ministry official said on Wednesday.

Output from El Sharara was first curbed on Tuesday, adding lift to oil prices and limiting losses on Wednesday, brokers and traders said.

In OPEC-member Nigeria, oil workers are on strike, another potentially supportive factor for crude. (Additional reporting by Libby George and Claire Milhench in London, Jane Xie in Singapore and Anna Sussman in New York; Editing by Marguerita Choy and Chizu Nomiyama)

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