Oil Down About 3% Again on Dollar, Awaits Supply Data

Reuters

Oil prices fell by up to 3 percent for a second straight day on Wednesday as a resurgent dollar weighed on the market ahead of U.S. inventory data.

Gasoline and heating oil fell more than 2 percent each, extending the slide across the fuels complex, on bets that U.S. refineries will be operating at full swing with the end of maintenance season.

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The dollar soared against major currencies on speculation about the first U.S. interest rate hike in years. A stronger greenback makes dollar-denominated commodities, including oil, less affordable in other currencies.

Other factors held little sway, including France's warning to Iran that it was ready to block a final deal on Tehran's nuclear program unless Iran provided full access to inspectors. Iran needs the nuclear deal to unlock sanctions on its crude exports.

Brent crude settled down $1.66, or 2.6 percent, at $62.06 a barrel.

U.S. crude settled at $57.71, down 52 cents, or 1 percent.

Brent's premium to U.S. crude <CL-LCO1=R> narrowed to a mid-April low of $4.50.

The American Petroleum Institute will issue at 4:30 p.m. EDT (2030 GMT) estimates on crude and oil products in storage ahead of Thursday's official data from the U.S. government.

A Reuters poll of nine analysts showed a crude stock drawdown of 900,000 barrels on average last week, marking a fourth consecutive week in inventory declines.

But some traders think crude stocks may have actually risen last week even as demand for gasoline accelerated in the run-up to Monday's Memorial Day holiday, which marks the start of heavy road travel across America often lasting through the summer.

"If you're looking for a catalyst for price recovery from this data, you may not really get it, and that's why the dollar's been exerting it's strength over oil," said John Kilduff, partner at New York-based commodities fund Again Capital.

Jim Ritterbusch of market advisory Ritterbusch & Associates in Chicago, agreed. "We are still viewing dollar gains as a requisite for additional price slippage toward our $49 and $54 targets per WTI and Brent respectively," he said.

Kilduff said he expects crude stocks to have risen by about half a million barrels last week in spite of a 2-million-barrel draw in gasoline.

Ritterbusch expects a crude build of nearly 2 million barrels and a gasoline draw of 0.8 million barrels. Citi Futures forecast a 2.5 million barrel draw in crude and a 1 million barrel build in gasoline.

(By Barani Krishnan; Additional reporting by Himanshu Ojha in London and Florence Tan in Singapore; Editing by Dale Hudson, David Goodman and Meredith Mazzilli)