US crude dips 4 cents to fresh 3-week low, settling at $47.55, on demand concern and dollar strength
- U.S. crude closed at another three-week low on Tuesday after selling off in the previous session.
- Chinese oil refineries operated in July at their slowest daily rates since September, raising concerns about demand.
- The dollar index rose for second day. A stronger dollar tends to limit demand for oil.
Oil prices cut earlier losses to trade roughly flat on Tuesday afternoon, as a surge in the dollar and signs of weaker demand in China weighed on the market.
U.S. light crude ended Tuesday's session down 4 cents at $47.55, setting a fresh three week low after dropping 2.5 percent in the previous session. The contract fell as low as $47.02 on Tuesday.
Benchmark Brent crude was up 16 cents at $50.89 a barrel by 2:20 p.m. ET (1820 GMT), after earlier touching a three-week low at $50.02.
If U.S. crude falls below $47 a barrel and Brent crude breaks below $50 a barrel, prices could test lows from June, said John Kilduff, a partner at Again Capital LLC.
"We're on the precipice of a large sell-off," he said.
Brent and U.S. crude both reached two-month highs in early August but have fallen gradually in the last few days, with falls accelerating on Monday.
Chinese oil refineries operated in July at their slowest daily rates since September, official data showed. The drop was steeper than expected, raising concerns over the state of Chinese demand and level of domestic stockpiles.
"People are taking a hard look at what the balance is," Kilduff said "We had seen in the past few weeks that demand growth was robust, and this turned that on its head."
Ample supply from big oil exporters, including members of the Organization of the Petroleum Exporting Countries and the United States, also encouraged investors to sell long positions bought in July during a period of rising prices, analysts said.
The dollar rallied on Tuesday to its highest in nearly three weeks against a basket of major currencies on an easing of the tensions around North Korea. A stronger dollar tends to limit demand for oil for buyers paying in other currencies.
The dollar index, which measures its strength against a basket of six major currencies, climbed 0.4 percent on Monday.
An announcement by the Nigerian subsidiary of Royal Dutch Shell that it had lifted a force majeure on Bonny Light crude exports also added to the market surplus.
Efforts by OPEC and other producers to limit output have helped lift Brent past $50 a barrel, but production elsewhere, particularly in the United States, has undermined prices.
U.S. crude stockpiles likely fell for a seventh consecutive week, along with a probable fall in distillate and gasoline inventories, a preliminary Reuters poll showed.
The weekly U.S. crude inventory report from industry group the American Petroleum Institute was due to be published later on Tuesday. Official U.S. government statistics will be released on Wednesday.
"The focus remains on OPEC, U.S. inventories and disappointing China demand," said Hans van Cleef, senior energy economist at Dutch bank ABN Amro in Amsterdam. "Those concerns have triggered profit taking after a strong run-up in July."
— CNBC's Tom DiChristopher contributed to this report.