Oil falls towards $70 on brimming U.S. stocks

Oil fell towards $70 on Thursday, after touching 10-month highs earlier this week, as swollen crude and distillate inventories outweighed positive economic data from the world's largest consumer, the United States.

U.S. crude for October fell 73 cents to $70.70 a barrel by 1321 GMT after falling by more than $1 earlier in the day. Brent crude lost 53 cents to $71.12 a barrel.

Investors were reaping profits after prices touched $75 a barrel on Tuesday, having risen nearly 130 percent since lows last December.

News that the U.S. economy had contracted more slowly than expected at 1 percent in the second quarter and a drop in U.S. jobless claims had little impact on prices.

"We have rising concerns about demand, with high inventories…So it will be a tough ride for crude at this point," said PFGBest Research analyst Phil Flynn.

Data from the Energy Information Administration (EIA) on Wednesday showed that U.S. crude inventories rose by 200,000 barrels last week, confounding analysts' expectations for a 1.1 million barrel decline.

This confirmed in part the bearish trend shown by the American Petroleum Institute (API) which showed a 4.3 million barrel rise in crude stocks on Tuesday.

Stocks of middle distillates, which include diesel and heating oil, rose by 800,000 barrels to total 162.4 million barrels last week, up over 30 million barrels against last year, and topping projections of a 300,000-barrel build.

RANGE-BOUND

Analysts said oil prices were likely to trade in a wide range between $70 and $75 a barrel in the absence of fresh bullish impetus.

"The market would need a strong reason to break $75," said Petromatrix analyst Olivier Jakob. "It would need continuous support from equities and the dollar and further support from the statistics."

Oil has also not received much support from the 2009 Atlantic hurricane season.

Tropical Storm Danny, the fourth for this year, posed no foreseeable threat to the Gulf of Mexico oil area and was expected to stay well out to sea for the next few days, the U.S. National Hurricane Center said.