UPDATE 11-Oil slips below $68 as rally fizzles before U.S. supply report

* Saudi Arabia says it thwarted missile and drone attacks
* OPEC+ offers boost by deciding to keep supply steady
* U.S. crude inventories expected to fall in weekly reports
* API reports stockpile rise

(Adds API data)
By Jessica Resnick-Ault
NEW YORK, March 9 (Reuters) - Oil fell to around $68 a
barrel on Tuesday in a choppy session, pressured as concerns
faded of a supply disruption in Saudi Arabia, which countered a
pause in the dollar's rally and prospects for tighter supply due
to OPEC+ output curbs.
On Monday, crude hit its highest level since the start of
the coronavirus pandemic, a day after Yemen's Houthi forces
fired drones and missiles at Saudi oil sites. Saudi Arabia said
it thwarted the strike, however, and prices slipped as supply
fears eased. Brent crude LCOc1 settled down 72 cents, or 1.06%, at
$67.52 a barrel. The contract pulled back after trading as high
as $69.33. It reached $71.38 on Monday, the highest since Jan.
8, 2020.
U.S. West Texas Intermediate (WTI) CLc1 fell $1.04, or
1.6% to settle at $64.01 a barrel. The contract hit its highest
on Monday since October 2018.
In post-settlement trade, U.S. crude extended losses. U.S.
crude oil stockpiles rose sharply in the most recent week,
according to trading sources, citing data from industry group
the American Petroleum Institute released after settlement.
Crude inventories rose by 12.8 million barrels in the week
to March 5, compared with analysts' expectations in a Reuters
poll for a build of 816,000 barrels, sources said. L1N2L72S5
"This is more of the same as refineries remain shut down,"
said Phil Flynn, senior analyst at Price Futures group, speaking
after the API data was released.
Last week's record decline in U.S. inventories came after
the shutdown of Gulf Coast refineries due to the recent winter
storm in Texas.
"The market seems to be softening on those concerns. It's
had an incredible run, and it's due for a correction," Flynn
said.
Official figures from the EIA are expected Wednesday at
10:30 a.m. ET.
In a monthly report, the EIA said it now expects U.S. crude
oil production to decline by 160,000 barrels per day (bpd) in
2021 to 11.15 million bpd, a smaller decline than its previous
forecast of a 290,000-bpd drop. L1N2L71PL
The Organization of the Petroleum Exporting Countries (OPEC)
plus Russia and allies, a group known as OPEC+, decided on
Thursday to broadly stick to output cuts, fueling a rally.
"Caution is advised as prices are, of course, not going to
rise forever," said Bjornar Tonhaugen of Rystad Energy. "A more
definite price direction is expected soon, when the U.S. weekly
oil inventory reports" are released.
"Dips have been lately viewed as buying opportunities," said
Tamas Varga of broker PVM. "Last week's OPEC+ meeting will
ensure that the global oil balance will get tighter in the
foreseeable future."
A stronger U.S. dollar, which tends to crimp investor demand
for commodities, has weighed on oil, analysts said. The dollar
eased from a 3-1/2-month high reached earlier. Prices gained support from expectations of a U.S. economic
recovery after the U.S. Senate approved a $1.9 trillion stimulus
package. The U.S. House of Representatives must approve it
before it goes to President Joe Biden for his signature.