Oil down 1 percent as global glut offsets U.S. crude draw forecast

By Barani Krishnan

NEW YORK (Reuters) - Oil futures settled 1 percent lower on Tuesday as worries about a stubborn global petroleum glut offset forecasts for a weekly drop in U.S. crude inventories.

Prices lost the previous day's upward momentum as speculation fizzled that the Organization of the Petroleum Exporting Countries and other oil producers would embark on another round of talks on price cooperation after their failed effort in April.

Brent crude settled down 41 cents, or almost 1 percent, at $44.98 a barrel.

U.S. West Texas Intermediate (WTI) crude fell 25 cents, or 0.6 percent, to settle at $42.77.

Both benchmarks rallied nearly 3 percent in the previous session, gaining traction from a rebound late last week after WTI's fall to April lows beneath $40 a barrel.

"The oil market remains in a battle between the trading community which focuses in the shorter term data and information which has been mostly bearish, versus the investment trading crowd which is focussed on the medium-to-longer term which is projected to be bullish," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

"Both WTI and Brent will have to move above the $50 per barrel level and remain there for the shorter-term traders to regain confidence that the market is embarking on a new up leg," Chirichella said.

The U.S. Energy Information Administration (EIA) is expected to report on Wednesday a 1.0 million-barrel crude stockpile drawdown for the week ended Aug. 5, after unexpected builds in the two prior weeks, analysts polled by Reuters said.

The American Petroleum Institute (API), a trade group, will issue its own report on U.S. petroleum stockpiles at 4:30 p.m. EDT (2030 GMT).

"To make a significant difference, you need a net draw of 1 or 2 million barrels across the crude, gasoline and distillates balances," said Phil Davis, trader at PSW Investments in Woodland Park, New Jersey. "A headline draw of 1 million barrels in crude means nothing to me."

"I think you'll see WTI going back below $40 in the next couple of weeks and fall will likely be a terrible time for oil."

Many analysts and traders have warned of the glut in both crude and refined oil products this summer, particularly pointing to the lagging demand for U.S. gasoline demand despite the peak season for driving in the United States. OPEC's biggest producers have also been pumping near record high levels.

The EIA said it expected a smaller decline of 700,000 barrels per day (bpd) in U.S. crude oil production in 2016 than the 820,000-bpd drop it forecast a month ago as an uptick in drilling will lead to more output later this year.

(Additional reporting by Alex Lawler in LONDON and Osamu Tsukimori in TOKYO; Editing by Marguerita Choy and David Gregorio)