UPDATE 7-Oil dips but pares losses with Wall Street bounce

(Updates prices, market activity)

HOUSTON, Oct 18 (Reuters) - Oil prices pared losses on Thursday as U.S. stocks bounced off session lows and a report showed a smaller-than-expected build in crude inventory levels at the U.S. oil storage hub Cushing.

In early trading, global benchmark Brent crude fell below $79 per barrel, or as much as 1.7 percent the day after a U.S. Energy Department report showed the fourth weekly increase in U.S. crude stocks.

Oil prices reversed course as U.S. equities came off session lows. Also traders said a report by market intelligence firm Genscape showed that Cushing levels rose less than 1 million barrels from Friday through Tuesday.

Oil prices remain under pressure from rising geopolitical tensions and as investors brace for lower Iranian crude exports after the U.S. re-imposes sanctions.

"It's a snap back," said Tariq Zarih, managing member at Tyche Capital Advisors in New York. "But we see further selling into the equity markets. You're in a risk-off posture and the (U.S. crude inventory) numbers were bearish yesterday."

Brent crude was down 29 cents at $79.76 a barrel at 11:24 EDT (1524 GMT). It has dropped almost $7 since Oct. 3 when it reached $86.74, the highest since late 2014. U.S. crude was down 20 cents at $69.55.

U.S. crude inventories rose 6.5 million barrels last week, the Energy Information Administration said on Wednesday, the fourth straight weekly increase and almost three times what analysts had forecast.

"Oil has been under pressure as crude oil inventories since the beginning of September have risen by 20 million barrels as a result of the refinery maintenance season," said Andrew Lipow, an oil market analyst at Lipow Oil Associates in Houston.

This month, the International Monetary Fund downgraded its forecast for 2018 global economic growth, which has weighed on oil prices. But Lipow said tension between Saudi Arabia and the United States after the disappearance of Saudi journalist Jamal Khashoggi has supported prices, which already were rising on concern about a decline in Iranian exports due to U.S. sanctions.

U.S. lawmakers pointed at the Saudi leadership over the disappearance and suggested sanctions could be possible. Saudi Arabia has denied that it had any role in Khashoggi's disappearance.

President Donald Trump on Wednesday gave Saudi Arabia the benefit of the doubt in the journalist's disappearance, suggesting the White House may not take additional action against Saudi Arabia.

(Additional reporting by Alex Lawler and Osamu Tsukimori; Editing by David Gregorio)