By Barani Krishnan
NEW YORK (Reuters) - The comeback rally in oil paused on Wednesday, with crude prices falling up to 4 percent, as traders took stock of the market's blistering 35 percent gain over the past month despite mounting U.S. supplies.
Oil began the day lower as Asian markets wound down for the Chinese Lunar New Year celebrations that would stretch into the weekend.
The selloff accelerated in the afternoon after a fire and explosion at a gasoline processing unit in a refinery owned by Exxon Mobil in Torrance, California, near Los Angeles. Gasoline and heating oil prices saw less losses compared to crude as traders reacted nervously to the incident.
Benchmark Brent crude fell $2, its most in two weeks, to settle at $60.53 a barrel, after touching a session low of $60.05. It had risen to $63 on Tuesday, its highest this year, marking a 35 percent gain from a near six-year low of $45.19 set on Jan. 13.
U.S. crude closed down $1.39, or 2.6 percent, at $52.14.
The selloff came ahead of supply estimates due at 4:30 p.m. ET (2130 GMT) from industry group American Petroleum Institute that could show a build of over 3 million barrels of crude last week.
Oil rallied the past month on extensive short-covering by traders fearing the market had hit bottom following a 60 percent price crash since June. Violence in Iraq and Libya, both important oil producers, added fuel to the rebound.
Market bears, however, point to creeping stockpiles of U.S. crude which they say counter any positive story in oil.
Crude stocks rose nearly 5 million barrels in the week ended Feb. 13, taking total U.S. inventories to a record high of nearly 418 million barrels. The next weekly update twill be provided by the government on Thursday.
"We have more supply coming from here with the refinery maintenance season in swing, and that's prompting some people at least to ask if the market has overstretched itself with the rebound," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.
(Additional reporting by Robert Gibbons in New York, Jack Stubbs in London and Henning Gloystein in Singapore; Editing by Dale Hudson, David Goodman, Marguerita Choy, Christian Plumb and Andrew Hay)
