NEW YORK (Reuters) - Crude oil futures fell 4 percent on Wednesday, wiping out gains from the previous day's rally, as a strong dollar, tumbling gasoline prices and rising U.S. crude inventories bore down on the market.
Adding to bearish sentiment was an internal OPEC document published by Reuters that showed weaker demand in the next few years for oil from the producer group, even as Saudi Arabia pumped near record levels to protect its market share.
Brent crude futures settled down $1.96, or 3.9 percent, at $48.58 a barrel. It had risen $1.75 on Tuesday.
U.S. crude closed down $1.58, or 3.3 percent, at $46.32. It gained $1.76 in the previous session.
Oil had rallied on Tuesday on the back of a Brazilian oil workers strike, supply constraints in Libya and a U.S. pipeline outage.
In Wednesday's session, the dollar rose to three-month highs against a basket of currencies as remarks from Federal Reserve Chair Janet Yellen intensified bets the central bank would raise interest rates next month if U.S. economic growth continued to improve. A strong dollar makes commodities denominated in the greenback, such as oil, less affordable for holder of other currencies. [USD/]
"The bottom line is we are still well supplied," said Tariq Zahir, trader in crude oil spreads Tyche Capital Advisors in New York. "With the U.S. dollar strong on us, there are serious headwinds for crude."
U.S. crude inventories rose for the sixth consecutive week, adding 2.85 million barrels last week, in line with forecasts, despite a drop in imports to the lowest level since 1991, the U.S. Energy Information Administration (EIA) said. [EIA/S]
U.S. gasoline futures tumbled almost 4 percent, buckling down from Tuesday's 5 percent rally, despite the EIA reporting a larger-than-expected 3.3 million-barrel draw in stockpiles of the motor fuel last week.
With autumn refinery maintenance season coming to an end, refinery utilization rates rose by 1.1 percentage points to 88.7 percent of capacity.
"Oil inventories have built by a fairly chunky amount despite refinery utilization increasing, and imports dropping," said Matt Smith, director of commodity research at energy database and consultancy ClipperData.
"Here we are, mired in the $40 levels, while production ticks higher and inventories stand at over 100 million barrels higher than this time last year."
Additional reporting by Dmitry Zhdannikov and Ron Bousso in London and Keith Wallis in Singapore; Editing by Marguerita Choy