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US crude settles down 2.27% at $50.43, reversing previous session's rally

$70 oil could be on the way: Yamada

Oil markets fell more than 2 percent on Thursday, wiping out the previous day's gains on profit-taking and after a run-up in the dollar, which weighed on prices of commodities denominated in the greenback.

The dollar index hit seven-month highs against basket of currencies and a three-month peak versus the euro after the European Central Bank kept interest rates unchanged.

On Wednesday, oil settled up about 2 percent, with U.S. crude closing at its highest level in 15 months, after a large and unexpected drawdown in U.S. crude stocks.

"After the big run, I think it is very reasonable", Kyle Cooper, analyst at ION Energy in Houston, said, referring to the price retreat on profit-taking.

Gartman: Fade the oil rally

The front-month contract for Brent crude fell $1.35, or 2.56 percent, at $51.32 per barrel at 2:42 p.m. ET (1842 GMT).

The front-month in U.S. West Texas Intermediate (WTI) crude oil, which expires at Thursday's settlement, was down $1.17, or 2.3 percent, at $50.43 per barrel. On Wednesday, it hit a July 2015 high of $51.93.

WTI's more-active second-month position slid $1.17 to $50.65.

The U.S. government has reported crude inventory draws in six of the past seven weeks, surprising analysts who usually expect a rise at this time of year from refinery maintenance.

U.S. crude oil stocks have been depleted by 26.5 million barrels in the past seven weeks, analysts at JCB noted. That is unusual even when taking into account hurricanes that can disrupt oil production and supplies by tankers.

In the latest week to Oct. 14, there was a drop of 5.2 million barrels, while refineries only ran at 85 percent. Lower crude imports were responsible for the draws, data showed.

Energy monitoring Genscape added to U.S. crude's improved outlook on Thursday by reporting a drop of nearly 1.25 million barrels in crude stockpiles the Cushing, Oklahoma delivery hub for WTI futures for the week to Oct. 18.

Oil hovers at $50

While oil markets were down in the latest session, they were still up about 13 percent from Sept. 27 when the Organization of the Petroleum Exporting Countries announced its first planned output cut in 8 years to rein in a global glut that has halved prices from mid-2014 highs above $100 a barrel.

Many remain skeptical about OPEC's ability to strike and effectively implement a deal at a Nov. 30 meeting, but the notion of coordination among the 14 member states has at least put a floor under Brent and WTI prices at around $50 a barrel.

"Speculative pressure is probably what is driving up prices," said Jonathan Chan of Singapore-based Phillip Futures.

Reuters technical commodity analyst Wang Tao said U.S. oil is expected to break a resistance zone of $51.67 to $52.11 per barrel, and then rise towards $52.78. Meanwhile, Brent oil may stabilize around a support at $52.49 per barrel and then retest a resistance at $53.45.

BMI Research even said it saw "significant potential for an upwards break in Brent towards $60 per barrel... driven by bullish technical drivers and supportive conditions in the broader financial markets," although it added fundamentals did not warrant much higher prices.

OPEC's November meeting may agree on a half a million to 1 million barrels per day oil production cut. The producer cartel hopes non-OPEC exporters, especially Russia, will cooperate.