SINGAPORE (Mar 18): Brent crude fell towards $53 a barrel on Wednesday as U.S. crude stocks were forecast to have surged for the tenth straight week to a new record high, fuelling supply concerns of a global oil glut, although a weaker dollar kept a floor under prices.
Brent for May delivery fell 50 cents to $53.01 a barrel by 0644 GMT after ending the previous session 7 cents up at $53.51.
U.S. crude for April delivery fell 92 cents to $42.54 a barrel, falling more than $1 a barrel in early Asian trade on Wednesday after crude inventories rose by 10.5 million barrels to 450 million in the week to March 13, data from industry group the American Petroleum Institute showed on Tuesday.
Analysts had expected a 3.8 million barrel increase.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 3 million barrels, API said.
Official inventory data will be issued later on Wednesday by the U.S. Energy Information Administration (EIA).
"Whether the API data is right or wrong it is still about market expectations or missed expectations," said Ben LeBrun, market analyst at Sydney's OptionsXpress.
The market is now watching for the EIA data to confirm the build in crude stocks, he said.
"If its better than expectations they'll be a short-term bounce in oil prices," he said.
The expiry of the Brent contract on Monday and the West Texas Intermediate forward contract on March 20 "is adding a bit of fuel, adding to volatility in the market", LeBrun said.
"I expect some technical support to kick in before oil retests (January's) record lows," he said.
Traders are also waiting for the U.S. Federal Reserve's policy making committee to outline its monetary policy objectives later on Wednesday which are expected to give a clearer intention on interest rates.
"If U.S. interest rate hikes would be pushed back, this would likely cause the dollar to weaken, however, only in the short run," said Singapore's Phillip Futures in a research note on Wednesday.
A weaker dollar should support oil prices because it makes commodities denominated in the dollar cheaper for holders of other currencies and expands their purchases of commodities and other assets.
Rising output from Libya and plans by Iran to boost oil production once Western sanctions are lifted have heightened concerns of global oversupply concerns or oil although Tehran's moves to flood the market with oil have been played down by diplomats.