Oil prices fell on Thursday and were setting up for a second consecutive weekly drop as the dollar strengthened and concerns over rising U.S. crude production continued to mount on signs of an inventory build at a key U.S. storage hub.
Brent was on track for a drop of around 1 percent this week, after last week's 4.4 percent slide. WTI was on track for a more than 1.4 percent decline after a 3.6 percent slide last week.
The dollar firmed by more than 0.5 percent against a basket of currencies on Thursday. Oil tends to have an inverse relationship with the dollar, as a stronger greenback makes it more expensive to buy dollar-denominated commodities like oil.
Also pressuring prices was data from market intelligence firm Genscape that showed inventories at the Cushing, Oklahoma storage hub rose by more than 290,000 barrels in the week to March 6, traders who saw the data said.
Stockpiles in Cushing have more than halved since November and this increase, if confirmed by official data, would be the first build in 12 weeks.
Data from the Energy Information Administration (EIA) published on Wednesday also showed U.S. crude production hit a record high of almost 10.4 million barrels per day (bpd) in the week ended March 2. This offset data indicating the build in U.S. crude inventories was smaller than expected.
"This week has been colored by yesterdays EIA report ... it's finally taking some of the wind out of the sails of the bullish speculators," said Rob Haworth, senior investment strategist with U.S. Bank Wealth Management.
The threat of the United States sparking a trade war with some of its largest trading partners has also put financial and commodities markets on edge.
"Until the U.S. tariff issue is better defined, we feel that odds favor a renewed sharp downturn in the stock market that will easily spill into the oil space in pushing WTI values below recent support at the $60 mark," Jim Ritterbusch, president of energy advisory firm Ritterbusch & Associates said in a note.
U.S. output is expected to surge beyond 11 million bpd by late 2018, surpassing current No. 1 producer Russia.
This U.S. increase is putting pressure on the Organization of the Petroleum Exporting Countries, Russia and other nations that have curbed output to prop up prices but risk losing market share.
China, one of the worlds top energy consumers, reported a steep monthly drop in crude imports in February, stoking worries about demand. Imports of crude dropped by more than 20 percent to a rate of 8.2 million bpd from 9.4 million bpd in January.