Brent crude prices fell on Wednesday pressured by a larger-than-expected increase in U.S. crude inventories, a trimmed demand forecast from the International Energy Agency and a stronger dollar.
While U.S. crude futures seesawed near unchanged, Brent crude fell more than 1 percent and dropped below its 200-day moving average of $109.37 per barrel, a technical level monitored by chart-watching traders and analysts.
U.S. crude stocks rose 2.62 million barrels last week, the U.S. Energy Information Administration (EIA) said in its weekly report, slightly more than the forecast for a build of 2.3 million barrels in a Reuters survey of analysts.
Distillate stocks posted a small, unexpected rise, while gasoline inventories fell more than expected, the EIA said.
The EIA's report of a sharp drop in crude oil stocks at Cushing, Oklahoma, delivery point for the U.S. light sweet crude contract, helped narrow the spread between Brent and U.S. crude futures.
"The drawdown in Cushing is significant. That's the area where the glut is happening ... and a drawdown in this part of the world would probably mean the spread between the Brent and WTI should continue to come in," said Phil Flynn, analyst at Price Futures Group in Chicago.
Brent's premium to U.S. crude fell below $16 a barrel to its lowest since Jan. 23.
Brent crude fell $1.29 cents to $108.36 a barrel, down for a fourth straight session and having fallen as low as $107.91. Brent's slide came after it received pressure on Tuesday from news that beginning April 1 South Korea plans to close a tax loophole on a rebate for crude, according to a customs source, which may affect the flow of North Sea crude to the country.
U.S. oil was unchanged near $92.50, having dropped as low as $91.91 after reaching $93.40. A lower close would snap a string of four consecutive higher settlements.
After initially receiving support from the EIA data showing falling stockpiles, U.S. RBOB gasoline futures slumped along with heating oil, the U.S. benchmark distillate contract.
The dollar rallied to a seven-month high against a basket of currencies, boosted by stronger-than-expected U.S. retail sales data.
A stronger U.S. currency can pressure dollar-denominated commodities like oil and copper. Copper prices also felt pressure from the stronger dollar on Wednesday.
Tepid Demand Growth Forecast
The International Energy Agency (IEA) trimmed its forecast for 2013 global oil demand growth in its monthly report, adding pressure to crude prices.
The IEA also said U.S. crude oil production gains would be enough to protect against most shocks from potential supply interruptions.
The IEA report came after the EIA trimmed its demand growth expectations and the Organization of the Petroleum Exporting Countries (OPEC) left its forecast unchanged in reports released earlier this week.
OPEC also warned that risks to the U.S. and euro zone's economic growth could dampen the demand growth expected by the oil producer group.