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RTRS:UPDATE 4-U.S. oil hits 3-1/2-mth low below $99 on stock build
 
* U.S. crude stockpiles grow more than expected - EIA

* First rise in Cushing stocks in more than three months

* Coming up: U.S. non-farm payrolls data at 1230 GMT

By Christopher Johnson

LONDON, Oct 22 (Reuters) - U.S. crude oil fell below $99 a barrel on Tuesday to its lowest since early July after U.S. crude stockpiles rose by more than expected, pushing the discount to North Sea Brent crude to its widest in six months.

Crude oil inventories in the world's top oil consumer rose by 4 million barrels to 374.5 million, well above an increase of 2.2 million forecast in a Reuters poll of analysts.

Inventories at Cushing, Oklahoma, the delivery hub for the U.S. oil benchmark, rose by 366,000 barrels to 32.99 million as pipeline bottlenecks eased, after shedding 17 million barrels since June 28.

U.S. crude oil futures for November, which expire at the end of trade on Tuesday, were down 30 cents to $98.92 by 1025 GMT after hitting $98.79, their lowest since July 2.

Brent crude oil for December was stronger, up 45 cents at $110.09. Brent increased its premium to U.S. crude to as much as $10.77, the widest since late April.

Seasonal refinery maintenance and shifting pipeline flows around Cushing helped reverse a long decline in stockpiles.

Traders are now betting on a near-term surplus of inventories in the United States, at least until refineries begin to increase processing again.

"Refining maintenance has eaten into demand for U.S. crude, helping build stocks," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

"But I don't see U.S. crude weakening much further below Brent and think the spread could come back towards $5 or $6."

Financial markets awaited U.S. jobs data at 1230 GMT for clues on when the Federal Reserve could start to wind down its monetary stimulus programme.

Brent was supported by a belief the Fed might delay tightening monetary policy until next year, which would remove some of the worries about demand in the U.S. economy and beyond.

Brent also found support from lower global supply. Libyan output has fallen sharply, and Nigerian output has been repeatedly hit by theft.

The U.S. jobs data for September was delayed from Oct. 4 by a partial U.S. government shutdown caused by wrangling in Washington over fiscal matters including the debt ceiling.

Analysts polled by Reuters expected non-farm payrolls to have increased by 180,000 in September after a rise of 169,000 jobs in August, with the jobless rate steady at 7.3 percent.

A senior Federal Reserve official said it would be tough for the Fed to have sufficient confidence in the strength of the U.S. recovery by its meeting in December to start reducing its $85 billion-per-month bond-buying programme.
Source