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Oil finishes above $108 after trading lower on fundamentals

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[May 01, 2014]  NEW YORK / LONDON (Reuters) Brent crude oil futures finished just above $108 per barrel on Wednesday after trading below that most of the day as crude oil inventories in the United States rose to a record high and traders anticipated increased exports from Libya.

RBOB futures suffered their biggest one-day decline in more than six weeks, leading declines across the energy complex, after a bigger-than-expected build in U.S. gasoline and distillate stocks.

U.S. crude stocks rose by 1.7 million barrels to just shy of 400 million last week, the highest since the U.S. Energy Information Administration (EIA) started collecting data in 1982.

While the build was slightly lower than forecast, traders said higher-than-predicted stocks of some oil products helped to maintain the bearish tone as output continues to grow. U.S. crude finished April down for the second month in a row, down 1.8 percent, its worst month since November.

"I think the selloff has been driven by the weak fundamentals," said Gene McGillian, analyst and broker at Tradition Energy in Stamford, Connecticut.

A tepid economic growth report also weighed on prices. The U.S. Commerce Department said on Wednesday that gross domestic product expanded at a 0.1 percent annual rate in the first quarter, the slowest pace since the fourth quarter of 2012.

Negative views were softened by a report on hiring from payroll provider ADP that showed private employers added 220,000 jobs in April, after increasing headcount by 209,000 in March. The April figure beat a median forecast of 210,000.

Combined with a weaker economic growth report, the build in crude oil products "should put downward pressure on products and also on crude," said James L. Williams, energy economist at WTRG Economics in London, Arkansas.

But the market broadly shrugged off news that U.S. Federal Reserve will cut its bond-buying program by a further $10 billion. Some analysts had expected it would put pressure on oil prices.

Brent crude for June delivery settled at $108.07 per barrel, down 91 cents. Brent futures gained less than 0.5 percent in April, after finishing lower in March.

June U.S. crude settled at $99.74 per barrel, down $1.54. It had risen 44 cents to close at $101.28 on Tuesday.

Hardest hit across the energy complex were RBOB futures, with the front-month May futures contract down almost 2.2 percent in early afternoon trading. May RBOB futures settled and went off the board at $3.0077 per gallon, down 1.82 percent on the day.

May heating oil futures settled and went off the board at $2.9349 per gallon, down 1.19 percent on the day.

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Distillate stocks were up 1.94 million barrels to 114.45 million, versus a forecast of a 600,000 barrel build, while gasoline stocks rose 1.56 million barrels to 211.57 million, versus a forecast of a 600,000 barrel draw.

"The builds in gasoline and distillate were more than consensus, and with refineries running above 90 percent capacity, we may have seen the seasonal bottoms in terms of supply for refined products," said Phil Flynn, analyst at Price Futures Group in Chicago.

In the crude market, traders were also weighing optimism about exports from Libya after its ports reopened had pressured oil prices this week, said SEB analyst Bjarne Schieldrop.

Libya's Zueitina oil port will load its first tanker of crude from May 1 to May 3 after being closed for nearly 10 months because of protests, trading and shipping sources said.

"It's more to do with optimism about higher exports than actual volume so far, as Zueitina only has capacity to export 70,000 barrels per day," Schieldrop said.

Ukraine-related sanctions against Russia were having a mixed impact on oil, with the measures likely to dent demand in one of the world's largest energy consumers but also enable it to export more, Schieldrop said.

Investors were also watching Iran developments after the United States targeted a Chinese businessman and a Dubai-based entity for alleged offences related to violations of sanctions imposed on Tehran.

(Additional editing by Simon Falush, Anna Sussman and Roberg Gibbons; editing by Dale Hudson, Prudence Crowther and Cynthia Osterman)

[ 2014 Thomson Reuters. All rights reserved.]

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