Oil up two percent after two-day drop; caution still on gasoline, Brexit

By Barani Krishnan

NEW YORK (Reuters) - Oil prices rose almost 2 percent on Wednesday as robust U.S. economic data lifted crude futures from two days of declines, although a gasoline glut and woes from Britain's European Union exit suggested more pressure ahead.

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 about the impact of Brexit on global growth, boosting share prices on Wall Street and crude futures, which were down about 5 percent in the past two days.

Brent crude settled up 84 cents, or 1.8 percent, at $48.80 a barrel. U.S. crude futures gained 83 cents, or 1.8 percent, to settle at $47.43.

Oil prices also rose in anticipation that the U.S. government will report on Thursday a seventh straight weekly drop in crude stockpiles. A Reuters poll estimated a drop in crude inventories of 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 from turning U.S. crude into gasoline <1RBc1-CLc1>, known as the gasoline "crack," remained at a four and a half month low despite expectations that a record number of motorists would hit the road during the July 4 holiday weekend.

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

Jitters over Brexit 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 Marguerita Choy and Steve Orlofsky)