CORRECTED-UPDATE 6-Oil falls below $108 on supply build, Libya prospects

Wed Apr 30, 2014 9:02pm IST

Coal Mining In The Punjab

Coal Mining In The Punjab

In Choa Saidan Shah miners dig coal with crude pick axes and load it onto donkeys to be transported to the surface earning a team of 4 workers around $10 to be split between them.  Slideshow 

(Corrects to remove reference to build in Cushing stocks in paragraph 3, removes extraneous word "cents" in paragraph 5)

* Stocks in United States at record high

* U.S. crude heading for lowest close in four weeks

* Events in Ukraine, Libya and Iran closely watched

By Simon Falush

LONDON, April 30 (Reuters) - Oil fell below $108 per barrel on Wednesday on a strong supply outlook, with stocks in the United States at a new record high and prospects for increased exports from Libya.

U.S. crude stocks rose by 1.7 million barrels to 395 million last week, reaching a fresh peak level 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.

Increasing supplies of crude from the United States and OPEC are expected to keep oil prices weak this year, barring further major geopolitical shocks, a Reuters poll of analysts showed.

Brent crude for June delivery was down $1.08 at $107.90 per barrel by 1444 GMT after climbing 86 cents to $108.98 in the previous session.

June U.S. crude was down $1.57 at $99.71 per barrel, after falling as low as $99.41, heading for what could be its lowest close in four weeks. It rose 44 cents to close at $101.28 on Tuesday.

"Crude oil stocks in the U.S. are rising to their highest level in decades and that's weighing on the whole crude complex," SEB analyst Bjarne Schieldrop said.

Schieldrop noted optimism about exports from Libya after its ports reopened had weighed on oil prices this week.

Libya's Zueitina oil port will load its first tanker of crude on May 1-3 after being closed for nearly 10 months due to 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.

The International Monetary Fund said sanctions were scaring off investors and pushing the economy towards recession.

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

Also, a decision from the U.S. Federal Reserve is due at 1800 GMT over whether to reduce its monthly bond purchases, a move which some analysts say would put pressure on oil prices. (Editing by Louise Ireland, Pravin Char and Dale Hudson)

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