Oil prices fell as much 1 percent for a second day in a row on Tuesday as a rallying dollar and global fuel glut offset forecasts for lower US crude stockpiles that would have been typically bullish for the market, Reuters reported.
A Reuters poll showed US crude stockpiles likely fell 2.2 million barrels last week, declining for a ninth week in a row. The American Petroleum Institute (API), a trade group, will be issuing its inventory report at 4:30 p.m. EDT, before the official Energy Information Administration's (EIA) data on Wednesday.
The market's attention has, however, been on an oversupply in fuels that is unexpected during the peak summer driving season. As storage on land tightened in recent weeks, fuel prices weakened, prompting traders to store diesel on tankers at sea for later delivery. Even if crude output tapers, some say sustained price recovery might be hard due to the glut.
"Whatever crude draws you're going to get from the API and EIA for last week, the product builds are likely to be bigger," said Kyle Cooper, oil markets consultant for New York-based broker ION Energy.
"Unless crude imports fall totally out of bed, there's ample oil in the tanks, and the headline numbers for crude won't be as bearish as the total numbers."
Brent crude LCOc1 settled down 30 cents, or 0.6 percent, at $46.66 barrel. It fell 1.4 percent on Monday.
US West Texas Intermediate (WTI) crude CLc1 fell 59 cents, or 1.3 percent, to settle at $44.65. WTI lost 1.6 percent in the previous session.
A protest over wages that shut the eastern Libyan oil terminal of Hariga and forced a suspension of 100,000 barrels per day of crude production helped the market limit some losses, traders said.
Brent's premium to WTI LCOc1-CLc2 reached its highest since the end of April, raising the export potential for US crude.
Also weighing on oil was the dollar's DXY rally to a four-month high, making greenback-denominated oil less affordable for holders of the euro and other currencies.
"We expect fresh lows by tomorrow that should force out some recently acquired speculative longs that have been entering the market amidst the price consolidation of the past eight to nine sessions," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.