LONDON: Brent crude oil fell below $99 per barrel on Wednesday after a bigger-than-expected build in weekly U.S. crude stocks, and a strong dollar continued to create headwinds for commodities.
U.S. crude stocks rose more than twice as much as expected week-on-week, the Energy Information Administration said, as refineries cut output and imports jumped.
Crude inventories were up 3.7 million barrels, compared with analysts' expectations for a decrease of 1.6 million barrels.
Brent was down 42 cents at $98.63 a barrel by 1457 GMT, after closing up $2.40 in the previous session, the biggest daily gain since Sept. 3. U.S. crude was down 86 cents at $94.02 after rising 2.1 percent on Tuesday.
"It looks like we've got extra oil hanging around - that was the initial shock of the number," said Phil Flynn, an analyst at the Price Futures Group in Chicago.
"The number indicates the imports were pretty darn good last week, (which) may be in part because we had a pretty strong dollar situation, I think that's why the number was so big."
The strong dollar remains a significant headwind for oil, as it makes commodities priced in dollars more expensive for buyers using other currencies.
OPEC LOOKS AHEAD
The U.S. crude stock builds were big enough to reverse Brent's rally on Tuesday, when prices had risen by the most in two-and-a-half months.
Brent had been boosted by a statement from Abdullah al-Badri, the Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), saying that the group could trim its 2015 output target by 500,000 barrels per day (bpd).
On Wednesday, others in OPEC were cautious. The group may not need to cut its oil output target at a meeting in November, a Gulf OPEC delegate and other OPEC sources said, as strengthening demand in coming winter months should support oil prices.
The market hoped this might help reduce a global supply glut, which has weighed on physical crude prices in northwest Europe and prompted traders to put large volumes of crude into storage.
Many OPEC countries need oil prices above $100 a barrel in order to meet their budget needs and analysts say Saudi Arabia, OPEC's biggest producer, could cut production in an effort to support prices. Any production cut by OPEC, due to meet in November, would be the group's first since 2008.
"It makes sense for Saudi Arabia to curb supply," Michael Poulsen, oil analyst for A/S Global Risk Management, said. "We're a bit in no man's land at the moment ... until we enter the season for higher demand for distillates and heating oil."
Abundant supplies and weak demand have tended to outweigh worries about conflicts in the Middle East and North Africa over the past month.
Libya's El Sharara oil field was shut on Wednesday after a tank was damaged at the Zawiya refinery, which it supplies, closing around 200,000 barrels a day of output.
But the Islamist insurgency in Iraq has had little impact on Iraqi oil exports to date and rising U.S. oil production, mostly from shale, has more than compensated for any lost output.
In Nigeria, oil workers have gone on strike, but in recent years, similar strikes have not significantly hurt production or exports.
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