Brent and U.S. crude futures held on to losses in choppy trading after a government report showed crude stocks rose more than expected last week in the U.S. Gasoline stocks rose, but slightly less than expected, and distillate stocks edged up, also less than expected, the report from the U.S. Energy Information Administration showed. Crude inventories increased 1.9 million barrels to 341 million barrels, higher than expectations of a 700,000 barrel build. Gasoline inventories rose 800,000 barrels. Distillate inventories, including heating oil and diesel fuel, increased by 100,000 barrels. ICE Brent November crude [LCOCV1 106.27 -0.87 (-0.81%) ] fell $1.14 to $106 a barrel, having traded from $105.73 to $107.41. On the New York Mercantile Exchange, November crude [CLCV1 83.53 -0.92 (-1.09%) ] fell $1.45 to $83 a barrel, trading from $82.66 to $84.62. It recovered from earlier lows, supported by weakness in the dollar [.DXY 77.67 0.17 (+0.21%) ], which has an inverse relationship with oil. Oil prices jumped more than 3 percent on Tuesday, bolstered by expectations that European officials would aggressively tackle the debt crisis in its peripheral economies, particularly Greece, which eased fears about the outlook for demand. However, the plans face opposition in Germany, and there are signs of a split within the currency bloc over the terms of Greece's next bailout. Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland said the sharp spikes in prices were due to the inability of investors and automatic trading programmes to interpret political news effectively. "The headline-reading trading machines cannot understand the complexity of Europe, so big up moves (are) followed by big down moves as they are unable to have a proper trading read on Europe," he said. Oil prices will weaken only slightly and hover above $100 a barrel next year, despite fears of a global economic recession and a steep fall in demand, the latest Reuters poll showed. Benghazi-based oil firm Agoco said on Wednesday it is planning restarts at three more Libyan oil fields in east and west Libya by mid-October, boosting output to 350,000 barrels per day. The return of supply of Libyan crude oil, which pumped 1.6 million barrels per day before a conflict which toppled the Gaddafi regime, is seen as bearish for the oil price. Stocks, Strikes Watched A sharp rise in U.S. gasoline inventories weighed on sentiment on Tuesday, with industry data showing a steep 4.6 million barrel rise last week, far above the 1 million barrel gain expected by analysts. Crude stocks rose by 568,000 barrels in the week to Sept. 23, the American Petroleum Institute said on Tuesday. Analysts polled by Reuters had projected an 800,000 barrel rise on average. Traders were also keeping an eye on the implications of strike action in French refineries. Workers at French refineries debated going on strike, torn on Wednesday between anger over moves to restructure the sector and memories of last year's month-long stoppage that disrupted global flows of oil but left unions drained and divided. Last October, physical crude prices fell, while there was a glut of unrefined fuel in the Mediterranean and product prices rose. "Possible impact hinges on duration and spreading of the strike action," said Commerzbank's Fritsch. "A multi-week long nationwide strike could lead to local supply bottlenecks and push European product prices up. On the other hand, it could ease the supply situation in the European crude market." Brent is expected to face resistance at $107.05, while the resistance for U.S. crude stands at $85.40 per barrel, according to Reuters market analyst Wang Tao. Brent is on track to fall 5.5 percent in the third quarter, its second straight quarterly decline and the steepest since the second quarter of 2010. Oil has fared better than commodities such as copper [HGCV1 3.3245 -0.115 (-3.34%) ] and gold [XAU= 1642.00 -6.90 (-0.42%) ] in the recent sell-off due to tight supplies in the physical market, analysts said. "We would highlight that because of that very tightness in the physical markets, oil prices have held up far better than other commodity markets, and we expect that outperformance to continue," Barclays Capital said in a research note. Royal Dutch Shell [RDSA-GB 1995.50 -40.50 (-1.99%) ] recently shut in 25,000 barrels per day of oil production in Nigeria, while Libyan crude production has yet to reach the market.

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