Oil down 2 percent on large U.S. crude, distillates build

By Barani Krishnan

NEW YORK (Reuters) - Oil prices fell 2 percent on Wednesday after U.S. government data showed a large surprise weekly build in U.S. crude and distillate stockpiles and a smaller-than-expected draw in gasoline.

The U.S. Energy Information Administration (EIA) said crude stockpiles rose for a second straight week, building by 2.3 million barrels in the last week, compared with analysts expectations for a rise of 921,000 barrels.

The EIA also distillate stockpiles, which include diesel and heating oil, rose by 1.5 million barrels, versus expectations for a 157,000-barrel drop.

Gasoline stocks fell by 691,000 barrels, compared with forecasts for a 1.2 million-barrel drop.

October, the front-month contract in Brent crude futures which was headed for expiry at Wednesday's session, was down $1.14, or 2.4 percent, at $47.23 per barrel by 10:49 a.m. EDT (1449 GMT).

The more-active November Brent, which will be the spot contract from Thursday, was down $1.22 at $47.51.

In U.S. crude futures, the front-month for the benchmark for the West Texas Intermediate (WTI) was down $1.10 at $45.25.

"I would call this the trifecta of bearish news," said Tariq Zahir, a trader in WTI timespreads at Tyche Capital Advisors in New York.

"We should be getting draws for this time of year. Not only are we getting shocking builds, we're also being squeezed by the bullishness of the U.S. dollar and a hurricane season that's had very little impact thus far on actual crude production."

The dollar hit three-week highs for a second day in a row on speculation that the U.S. Federal Reserve would raise interest rates in coming months. A stronger dollar makes commodities denominated in the greenback, including crude, less affordable for those holding the euro and other currencies.

(Additional reporting by Libby George in LONDON and Mark Tay and Henning Gloystein in SINGAPORE; Editing by William Hardy and Nick Zieminski)