NEW YORK (Dow Jones)-- Crude futures dropped Wednesday as an industry group's data showed an unexpected increase in U.S. crude stockpiles, souring hopes that oil supplies would continue to tighten. Light, sweet crude for September delivery recently traded $1.10, or 1.7%, lower at $64.51 a barrel on the New York Mercantile Exchange. The September contract is in its first day as the front month, after August crude futures expired at $64.72 a barrel. Brent crude on the ICE futures exchange was down 83 cents, or 1.2%, at $66.04 a barrel. The American Petroleum Institute reported Tuesday that oil inventories increased by 3 million barrels last week, contrary to analysts' expectations of a 1.7 million barrels draw. Gasoline stocks also rose more than analysts estimates. The API data normally carries less weight than Department of Energy figures, which are due to be released at 10:30 a.m. EDT. But the surprise was big enough to jolt traders before the next set of data comes out. "The big build in crude put pressure on prices," said Tony Rosado, a broker at GA Global Markets in New York. Rising oil and fuel inventories are eroding support for a rally that has lifted oil prices by 8% since July 14. Futures have ended higher for five straight sessions, on the back of better-than-expected corporate earnings, which are seen eventually translating into increased economic activity and higher oil demand. But futures have had trouble holding onto gains, with distillate inventories, including heating oil and diesel, at a 24-year high, and gasoline stocks quickly increasing as well. According to a Dow Jones Newswires poll of analysts, the data will show an 800,000 barrel increase in gasoline inventories and a 1.4 million-barrel gain for distillate stockpiles. Refinery utilization is expected to fall 0.5 percentage point to 87.4% of capacity. "Today's DOE report may bring home the reality of the supply and demand situation," wrote Peter Beutel, president of trading advisory firm Cameron Hanover. Weaker equities futures put further pressure on oil prices. S&P 500 futures fell 3.1 points to 950.30 and Dow Jones Industrial Average futures fell 32 points to 8854. Front-month August reformulated gasoline blendstock, or RBOB, recently traded 2.03 cents, or 1.1%, lower at $1.7917 a gallon. August heating oil recently traded 37 points, or 0.2%, lower at $1.6947 a gallon. -By Madalina Iacob, Dow Jones Newswires; 212-416-2677; madalina.iacob@dowjones.com.

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