Oil prices dipped below $70 a barrel on Wednesday as a strengthening dollar prompted less investment in crude and after U.S. data showed fuel stocks surged last week in the world's biggest energy consumer.
The dollar gained 0.2 percent against a basket of foreign currencies on Wednesday, on optimism that third-quarter U.S. corporate earnings will show signs of an economic rebound. The dollar rebounded from an eight-month low against the yen.
Weakness in the dollar had supported oil and other commodities priced in the greenback in recent days, as investors bought goods that typically hold their value when the dollar weakens.
Government figures showed crude inventories in the United States unexpectedly fell in the week to October 2 by 1 million barrels, versus analyst expectations of a 2.2 million barrel rise.
But the weekly report from the U.S. Energy Information Administration (EIA) also showed a surge in fuel stocks in the world's biggest energy consumer, a harbinger of sluggish demand recovery from industries and consumers.
Gasoline stocks leapt by 2.9 million barrels, far more than the 1 million barrels predicted by the market as refiners upped production. Distillate stocks -- which include diesel and heating oil -- rose by 700,000 barrels, more than double the predicted 300,000-barrel build.
The fuel inventories jumped a lot, and that's a bearish factor, but one offset by the crude draw, Tradition Energy's Gene McGillian said.
Crude is pivoting around $70 a barrel with factors on either side to hold it there. The key is going to be when demand figures for gasoline and distillate pick up.
The EIA said product