By Alex Lawler
LONDON (Reuters) - Oil slipped towards $86 a barrel on Wednesday after a U.S. government report showed a large rise in crude stocks, halting a tentative recovery from a four-year low.
Global benchmark Brent reversed course after the U.S. Energy Information Administration said crude inventories rose by 7.11 million barrels, more than the 2.7 million-barrel increase analysts had expected.
"The large crude oil build is the dominant feature of the report, making it bearish overall," said John Kilduff, partner at Again Capital LLC in New York.
Brent crude was down 3 cents at $86.19 a barrel at 1506 GMT. Its Oct. 16 low of $82.60 was its weakest since 2010. U.S. crude fell 48 cents to $82.01.
Some analysts said the decline in the market might be bottoming out. Brent has tumbled from $115 in June on abundant supply and concerns that slowing economic growth in Europe and China would hit oil demand.
"The price of Brent seems to be forming a bottom at $86 a barrel," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. "As winter approaches in the northern hemisphere, we should see the usual seasonal increase in demand for oil."
Others said it was premature to talk of the market finding a floor.
"Brent is going into a sideways consolidation," said Tony Machacek, broker at Jefferies in London. "It's too early to say the market has bottomed out. For my money, it's going to struggle to get back up to $90 for the moment."
The increase in crude stocks reported by the EIA at 1430 GMT was much larger than the 1.2 million-barrel rise that industry group the American Petroleum Institute had reported on Tuesday.
Also on Tuesday stronger-than-expected demand figures from China helped prices to rise. Implied demand in the world's second-largest consumer jumped 6.2 percent in September from August to hit a seven-month peak.
A more upbeat tone was evident in the financial markets on Wednesday. European shares edged up, driven by some strong company earnings results and hopes of corporate bond buying by the European Central Bank.
Some oil analysts see a more bullish outlook for the market, including Standard Chartered's Paul Horsnell, known for forecasting the market's long rally a decade ago, who forecasts a Brent price of $105 in 2015.
Oil has come under pressure from signs that the Organization of the Petroleum Exporting Countries is reluctant to cut output when it meets on Nov. 27, although Libya's OPEC governor called for a cut of at least 500,000 barrels per day.
Fritsch of Commerzbank said the market still faced a large surplus next year without OPEC curbs, leaving prices vulnerable to falling again.
(Additional reporting by Robert Gibbons and Jane Xie; editing by William Hardy and Jane Baird)
