* U.S. crude stockpiles fall by 3.1 mln bbls in latest week -EIA
* Benchmarks lost more than 3% on Tuesday
* Iran says it came to aid of foreign oil tanker in the Gulf (Updates with settlement prices, adds commentary)
NEW YORK, July 17 (Reuters) - Oil futures fell more than 1% on Wednesday, extending a more than 3% drop in prices the previous session, after U.S. government data showed large builds in refined product stockpiles.
Brent crude futures were down 69 cents, or 1.1%, to settle at $63.66 a barrel. U.S West Texas Intermediate (WTI) crude futures fell 84 cents, or 1.5%, to settle at $56.78 a barrel. Both benchmarks shed more than 3% on Tuesday.
drawdown in crude stockpiles last week, large builds in refined product inventories kept prices lower.
U.S. crude inventories fell 3.1 million barrels, EIA data showed, more than analysts' forecasts for a decrease of 2.7 million barrels.
Gasoline
"Gasoline and distillate stocks increased strongly, which adds a bearish tone to the report," said Carsten Fritsch, oil analyst at Commerzbank. "The fact that oil product stocks increased sharply is a reflection of weaker demand."
Crude production was disrupted last week hurricane. on Tuesday, the Bureau of Safety and Environmental Enforcement (BSEE) said,
The U.S. drilling regulator said 1.1 million barrels per day of oil, or 58% of the region's total, remained shut.
Oil prices slumped on Tuesday on increased hopes for a return of Iranian crude to the global oil market after U.S. President Donald Trump said progress had been made with Tehran, signalling tensions could ease in the Middle East.
However, Iran later denied it was willing to negotiate over its ballistic missile programme, however, appearing to undercut Trump's statement.
"It is hard to believe that either the United States or the Iranian stance would change drastically, therefore yesterday's sell-off might turn out to be an excellent buying opportunity," PVM analysts wrote.
sowing confusion at a time of high tension in the Gulf.
(Additional reporting by Shadia Nasralla in London and Aaron Sheldrick in Tokyo; Editing by Marguerita Choy, Louise Heavens and Sonya Hepinstall)
