A rallying dollar punished oil on Tuesday as players took profit on recent highs in the spread between Brent and U.S. crude, traders said.
In New York, U.S. West Texas Intermediate crude closed down $1.71, or 3.4 percent, at $48.29 a barrel, weighed by the dollar and expectations that U.S. crude inventories had swelled to another record high last week from new supply builds.
Brent, the London-traded global oil benchmark, slumped about 4 percent as expectations of a mid-year U.S. rate hike sent the dollar soaring to multi-year highs, making commodities denominated in the greenback costlier for holders of other currencies.
Brent was down $2, or 3.7 percent, at $56.50 a barrel.
Traders said WTI saw less pressure than Brent as players bet on a further narrowing of its discount to the London benchmark after forecasts for a modest build last week in the Cushing, Oklahoma delivery point for U.S. crude versus the rest of the country.
"The dollar's might is creating unexpected headwinds for oil. Brent particularly is taking it harder than WTI as people unwind and take profit in the spread between the two," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.