Oil rebounds from 2-day drop; caution still over gasoline, Brexit

By Barani Krishnan

NEW YORK (Reuters) - Oil prices rose 1 percent on Wednesday as robust U.S. economic data helped lift crude futures from two days of declines, although analysts cautioned of more pressure from a gasoline glut and Britain's exit from the European Union.

The pace of growth in the U.S. service sector was the fastest in seven months in June, an industry report showed.

The data alleviated some concerns over the Brexit impact on global growth, boosting both share prices on Wall Street and crude futures that have lost about 5 percent or more in the past two sessions.

Brent crude futures were up 48 cents, or 1 percent, at $48.44 a barrel by 12:56 p.m. EDT (1656 GMT), reversing a 1 percent drop from earlier in the day.

U.S. crude futures rose 51 cents, or 1 percent, to $47.11 a barrel, after hitting a session low at $45.92.

Oil prices also rose in anticipation that the U.S. government will report on Thursday a seventh straight weekly drop in crude stockpiles, traders said.

A Reuters poll forecast crude inventories fell 2.3 million barrels for the week ended July 1. The American Petroleum Institute (API) will issue its own report on domestic oil stockpiles at 4:30 p.m. EDT (2030 GMT), before Thursday's official data.

"Big selloffs before oil statistics have a tendency to get some correction and that's what we saw today," said Pete Donovan, broker at Liquidity Energy in New York.

Crude futures fell earlier on worries of U.S. gasoline oversupplies.

The profit for turning U.S. crude into gasoline, known as the gasoline "crack," hit a February low under $13 a barrel, amid the motor fuel's glut and despite record number of motorists expected to have hit the roads during the July 4 holiday weekend.

Gasoline stocks in the U.S. East Coast, home to the New York Harbor which serves as delivery point for the motor fuel, hit a record high of 72.5 million barrels for the week ended June 24. Vessels carrying gasoline-making components could not unload at New York Harbor this week due to lack of space.

Jitters over Brexit had also weighed on oil as the pound hit 31-year lows after three British property funds were suspended amid a rush of redemptions by investors.

"Neither the gasoline glut nor Brexit is going away for now," said David Thompson, executive vice-president at Washington-based commodities-focused broker Powerhouse.

(Additional reporting by Libby George in London and Aaron Sheldrick in Tokyo; Editing by Chris Reese and Marguerita Choy)