Oil fell towards $71 a barrel today, giving up some of its previous session gains of 2 per cent, as an industry report showing a surprise build in US crude oil stockpiles again stoked concerns over demand revival.
But a weak US dollar, which hit a one-year trough against the euro today, helped limit oil's decline, analysts said.
US crude for November delivery fell 27 cents to $71.48 a barrel. The October contract, which expired yesterday, rose $1.84 to settle at $71.55 a barrel.
London Brent crude fell 21 cents to $70.32.
Crude stocks rose 276,000 barrels in the week to Sept. 18, the American Petroleum Institute said on Tuesday, against a Reuters poll forecast for a drawdown of 1.5 million barrels.
The increase in crude inventories was driven by higher imports, that rose 219,000 barrels per day (bpd) as well as slower refinery runs, which dipped 92,000 bpd, the API said in its weekly report.
The API report is seen as a precursor to more authoritative data from the US Energy Information Administration, which will be released later today.
Analysts said weakness in the dollar, however, had offered some support to oil and commodities prices. The dollar <.DXY> fell 0.25 percent to 75.928 points against a basket of key currencies, as hopes for global economic recovery prompted investors to switch to higher-yielding currencies from the safehaven dollar.
While the Federal Reserve Bank is widely expected to hold interest rates steady, markets will be watching for comments later today that indicate the Fed might wind back its super-accommodative policy stance in view of improving economic data, which would boost the dollar, analysts said.
Separately, Opec kingpin Saudi Arabia told Reuters in an interview yesterday that demand for Saudi crude was increasing, and that was reflective of the world's economy recovering from its worst recession since the Great Depression.
Saudi Arabia's oil minister Ali al-Naimi also said that Opec would not need to cut output next year, based on latest figures on supply and demand.
Reuters