U.S. crude drops over 3 percent as focus back on supply

SEOUL (Reuters) - U.S. crude oil futures dropped more than 3 percent in Asian trading on Wednesday to test the $30 a barrel level again, as profit taking wiped out most of the gains seen in the previous session linked to hopes for output cuts.

U.S. crude lost 88 cents at $30.57 a barrel as of 2321 GMT after hitting a session-low of $30.30 a barrel. It had ended 3.7 percent, or $1.11, higher at $31.45 a barrel.

Brent crude had settled up $1.30, or 4.26 percent, at $31.80 a barrel on Tuesday."The positive sentiment stemmed from strong U.S. corporate earnings and talk of OPEC and Russia considering production cuts. We consider the likelihood of any agreement between these parties as extremely low," ANZ said in a note on Wednesday.

"However, rising U.S. crude stockpiles are likely to remain a headwind in the near term. At the current pace, the U.S. crude stockpiles will cross the all-time high of April last year in the next month."

U.S. crude stocks rose by 11.4 million barrels in the week to Jan. 22 to 496.6 million, compared with analysts' expectations for an increase of 3.3 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 664,000 barrels, data from industry group the American Petroleum Institute showed on Tuesday. [API/S]

U.S. government data on U.S. crude oil stocks is due on Wednesday. [EIA/S]

U.S. and global benchmark Brent crude prices rallied on Tuesday after the oil minister of Iraq said that OPEC kingpin Saudi Arabia and top non-OPEC producer Russia are showing signs of flexibility about agreeing to tackle an oil glut that has pushed prices to 12-year lows.

Wall Street shares also rebounded in choppy trading on Tuesday on hopes oil producers will cut output to address the supply glut that has punished equity markets and pushed crude values to 12-year lows. [MKTS/GLOB]

(Reporting by Meeyoung Cho; Editing by Ed Davies)