Oil prices fell by up to 3 percent for a second straight day on Wednesday as a resurgent dollar weighed on the market amid concerns that U.S. crude supplies may have started rising again after three weeks of draws.
Industry group American Petroleum Institute (API) said after the market's settlement that U.S. crude inventories rose by 1.3 million barrels last week.
A Reuters poll of nine analysts estimated a crude stock drawdown of 900,000 barrels on average, which would mark a fourth consecutive week in inventory declines. Data from the U.S. Energy Information Administration (EIA) on Friday will show how accurate those estimates are.
Gasoline RBc1 and heating oil HOc1 prices fell more than 2 percent, 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.
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 LCOc1 settled down $1.66, or 2.6 percent, at $62.06 a barrel.
U.S. crude CLc1 settled at $57.71, down 52 cents, or 1 percent.
Both extended losses in post-settlement trade after the API data.
Brent's premium to U.S. crude fell to $4.49, its lowest since mid-April, before widening out to around $4.70 in late trading.
Even before the API data, some traders and analysts had bet crude stocks may have risen last week despite heavier gasoline consumption in the run-up to Monday's Memorial Day holiday, which unofficially kicks off the peak U.S. summer driving season.
Jim Ritterbusch of market advisory Ritterbusch & Associates in Chicago says he expects the EIA to announce a crude build of nearly 2 million barrels and a gasoline draw of 800,000 barrels last week.
He expects the dollar to continue leading oil near-term.
"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.
John Kilduff of New York hedge fund Again Capital expects the EIA to cite a 500,000-barrel crude build and 2 million-barrel gasoline draw. Citi Futures expects a crude draw of 2.5 million and gasoline build of 1 million.
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