Brent crude oil fell towards $82 a barrel on Thursday as apparent momentum towards a deal between Iran and world powers over its nuclear program and a strong U.S. dollar overwhelmed supply shocks in the Middle East.
The dollar rose after data on Thursday showed the number of Americans filing new claims for unemployment benefits fell more than expected in the previous week, putting pressure on the dollar-denominated oil price.
Brent crude for December was down 60 cents at $82.35 a barrel by 1410 GMT, after touching a four-year low of $81.63 on Wednesday. U.S. crude fell by more than $1 to a low of $77.46.
U.S. Secretary of State John Kerry said on Wednesday that a deal between Iran and six world powers would be harder to achieve after a Nov. 24 deadline, suggesting a degree of urgency ahead of planned talks in Oman next week.
"If sanctions on Iran are eased, one needs to review once again the supply and demand balance," said Olivier Jakob of Petromatrix, a Swiss energy consultancy.
Jakob said any breakthrough could increase Iran's exports by up to 500,000 barrels a day in 2015, depending on the nature of a deal.
Samuel Ciszuk, senior adviser on supply security at the Swedish Energy Agency, told the Reuters Global Oil Forum on Wednesday that he saw the odds of a deal or compromise being reached as 50-50.
U.S. crude inventories rose 460,000 barrels in the week to Oct. 31, Energy Information Administration data showed on Wednesday, albeit lower than analysts' expectations of an increase of 2.2 million barrels.
"U.S. domestic production is at its highest level ever, and imports are at their lowest for more than a decade. That's a bearish outlook in the short term," said Tamas Varga, an analyst at PVM Oil in London.
Partly due to the rapid growth in U.S. shale production, the market share of the Organization of the Petroleum Exporting Countries is set to be 5 percent smaller by 2018, the group said in a report on Thursday.
In its 2014 World Oil Outlook, OPEC said it expected global demand for its crude oil to average 28.50 million barrels per day (bpd) in 2018, down 1.5 million bpd from 2014, because of increasing non-OPEC supply even as global demand rises.
Supply shocks in the Middle East gave little support to prices. Libya's production fell by at least 200,000 barrels a day on Wednesday as gunmen overran the El Sharara oilfield, sources said.
Libya hopes to reopen the field "very soon" but first needs to resolve a conflict between local tribes, an oil official said on Thursday.
In Yemen, tribesmen blew up its main oil export pipeline on Thursday, stopping crude flows of about 70,000 barrels a day, energy industry and tribal sources said, the latest in a series of such attacks.
Prices rose sharply on Wednesday as rumors of a pipeline explosion in Saudi Arabia circulated, but fell back as it emerged the incident was a fire at a diesel pipeline, which was quickly brought under control.
The European Central Bank kept interest rates at record lows at its policy meeting on Thursday, driving the euro down and adding to signals of lackluster economic growth in the oil-importing euro zone.
While most analysts expect prices to keep falling, North Dakota oil producer Continental Resources bet on a rally by scrapping its price hedges.
"We have elected to monetize nearly all of our outstanding oil hedges, allowing us to fully participate in what we anticipate will be an oil price recovery," Chief Executive Harold Hamm said in a statement on Wednesday.
(By Sam Wilkin; Additional reporting by Seng Li Peng in Singapore; Editing by William Hardy, Jane Baird and Crispian Balmer)