SINGAPORE: Brent crude slipped towards $102 a barrel on Thursday, reversing some of the sharp overnight gains, as US industry data showed fuel stocks rose last week and raised fresh doubts about the strength of demand in the world's biggest oil consumer.
Oil futures on both sides of the Atlantic have seen wide swings this week, as the US dollar has gyrated. Brent hit a 16-month low on Tuesday, before bouncing back $2.43 yesterday as the prospect of peace talks over Ukraine and strong US economic data raised demand expectations. Brent crude for October delivery fell 64 cents to $102.13 a barrel by 0553 GMT. US crude was down 67 cents at $94.87 a barrel, after settling $2.66 higher on Wednesday.
"The size of swings in the dollar is a source of volatility for commodities," said Ric Spooner, chief analyst at CMC Markets in Sydney.
The US currency rose to a 14-month peak against a basket of currencies this week, but has since come off. A stronger greenback makes it more expensive for importing countries to buy dollar-denominated oil.
"The market is getting serious about adjusting for a tightening of US interest rates, and this process has the ability to take oil prices lower," Spooner said.
"This suggests that against a background of a very well-supplied market and a period of seasonal weakness lower prices are possible." FUEL STOCKS RISE
Oil prices were pulled lower as data from industry group American Petroleum Institute (API) - released after Wednesday's session closed - showed fuel stocks rose last week.
Gasoline stocks rose by 362,000 barrels last week, compared with analysts' expectations in a Reuters poll for a 1.3 million-barrel decline. Distillate fuels stockpiles, which include diesel and heating oil, rose by 385,000 barrels, compared with expectations for a 500,000-barrel drop, the API data showed.
US crude inventories fell only 545,000 barrels to 361 million last week as refinery capacity utilization fell 0.5 percentage point to 93.2 percent. The more closely watched update from the government's Energy Information Administration is due at 1500 GMT.
It is delayed by one day due to a US holiday last Monday.
In bullish signals for oil demand, new orders for US factory goods posted a record gain in July and auto sales last month accelerated to their highest level in 8-1/2 years.
Geopolitical tension in key oil producing regions also continued to represent potential support for oil prices. Libya's oil output has risen to 725,000 barrels a day, more than six times the level two months ago, despite an uncertain political situation.
But a group of rebels campaigning for autonomy in eastern Libya rejected the parliament set up by another armed group in Tripoli, although it agreed to honour a deal to keep major oil ports open.
In an episode that may heighten concern about the vulnerability of Saudi Arabian energy infrastructure, a small fire broke out on a gas pipeline in eastern Saudi Arabia this week after assailants shot at a police patrol.
The episode happened after the Kingdom said it had has detained 88 people, more than half of them Saudis, on suspicion of plotting "terrorist" attacks.
"While markets haven't recently been reacting to fluctuating circumstances in (Ukraine), risks to crude output in OPEC's largest producer and holder of global swing supply, Saudi Arabia are likely to see buying in futures markets," analysts at ANZ said in a note.
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