By Barani Krishnan
NEW YORK (Reuters) - Oil prices fell 2 percent on Monday as rising stocks of crude and refined fuel intensified fears of another major glut building in the market.
Market intelligence firm Genscape reported that the Cushing, Oklahoma delivery hub for U.S. crude futures saw a supply build of 26,460 barrels in the week to July 15, traders who saw the data said.
Morgan Stanley said in a report that demand for fuels such as diesel and gasoline were lagging petrochemicals, clouding the outlook for oil.
"A rapid rise of non-petroleum products (demand) is boosting total product demand, but this is unhelpful for crude oil. Based on the latest data, even our tepid 800,000 barrels per day growth estimate for global crude runs looks too high," it said.
U.S. gasoline and distillate stocks surged unexpectedly last week, government data showed, crimping margins for refiners at the height of summer driving season when demand for fuels were generally healthy.
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Morgan Stanley said it still expected a supply-demand rebalancing in oil by mid-2017 but added that fundamental headwinds were growing the market. "Tail risks are admittedly large in both directions, as geopolitics add to uncertainty."
Brent crude was down 89 cents, or 1.9 percent, at $46.72 a barrel by 10:32 a.m. EDT (1432 GMT). It fell more than $1 earlier to a session low of $46.51.
U.S. crude slid by 80 cents, or 1.8 percent, to $45.15 a barrel.
Turkey's attempted coup barely affected the market as Istanbul's Bosphorus Strait, which handles about 3 percent of global oil shipments mainly from Black Sea ports and the Caspian region, reopened from a brief closure.
Oil prices are up nearly 75 percent since hitting 12-year lows of around $27 for Brent and about $26 for U.S. crude in the first quarter. The rally has stalled since the two benchmarks breached the $50 a barrel mark in May as worries grew that higher prices will fuel more production.
Saudi Arabia's energy minister said on Sunday the kingdom always reacts to oil market supply and demand and would continue to monitor crude markets for any developments.
Hedge funds cut their bullish bets on Brent to the lowest in four month lows last week even they raised their positive wagers on U.S. crude, data showed.
(Additional reporting by Ahmad Ghaddar in LONDON; Editing by Adrian CroftEditing by Marguerita Choy)