Oil prices just under five-month highs, supported by weaker dollar

LONDON Oil prices slipped just below five-month highs on Thursday, with support from a weak dollar and falling U.S. crude inventories undermined by bearish sentiment about fuel demand.

Brent crude fell 7 cents to $45.10 a barrel by 0802 GMT, while U.S. crude was down 25 cents at $41.94.

The two benchmarks rose to their highest since March 6, completing a four-day rally, after the Energy Information Administration reported a much bigger than expected drop in U.S. crude stockpiles.

The dollar index, which measures the greenback against a basket of six major currencies, logged its biggest monthly percentage fall in a decade in July and a Reuters poll found analysts expected it to continue falling into next year.

The index has moved in and out of positive territory on Thursday after falling for two sessions. A weaker U.S. currency makes dollar-priced oil cheaper for holders of other currencies.

“Asia today, with a light data calendar and no headlines of note, appears to be content to range trade. Thus we are seeing both Brent and WTI flip-flopping each side of unchanged (…)with no overriding theme,” said Jeff Halley, senior market analyst at OANDA.

“I expect that state of affairs to spill over into Europe, unless the U.S. dollar tracks lower aggressively again, in which case oil should grind higher,” Halley added.

Investors remain wary of rising U.S. refined product inventories at a time when U.S. central bankers said the resurgence in coronavirus cases was slowing the economic recovery in the world’s biggest oil consumer.

EIA data showed distillate stockpiles, which include diesel and heating oil, climbed to a 38-year high and gasoline inventories unexpectedly rose for a second week.

The U.S. EIA calculated gasoline demand remains around 8.6 million barrels per day, around 10% lower than a year earlier, just as the U.S. driving season was winding down.

(Additional reporting by Sonali Paul in Melbourne and Seng Li Peng in Singapore; Editing by Edmund Blair)

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