Oil prices slipped below $76 a barrel on Wednesday after a U.S. government report showed gasoline stockpiles rose more than expected at the height of the summer driving season.
The losses were tempered, however, by a simultaneous decline in U.S. crude oil inventories along with record weakness in the dollar -- which undermines the value of dollar-denominated oil.
London Brent crude, seen as the best indicator of the global market, was down 45 cents at $75.95 a barrel by 1730 GMT. It hit an 11-month high of $76.63 on Tuesday. U.S. crude was down 7 cents at $72.74.
The losses came after weekly data from the U.S. Energy Information Administration showed a 1.2 million barrel increase in gasoline inventories, beating analyst expectations of a 900,000 barrel build, as refineries boosted production.
Energy traders are focused on U.S. gasoline stockpiles during the summer vacation season, when demand typically peaks.
Crude inventories, meanwhile, slipped 1.4 million barrels, compared to a predicted rise of 100,000 barrels.
I would consider the data to be neutral to a little bearish. We did get a surprise draw in crude but the product data, especially on gasoline, look a little bearish, said Bill O'Grady, assistant director of market analysis at A.G. Edwards in St. Louis, Missouri.
Keeping a floor under prices, the U.S. dollar sank to a record low against the euro for the second straight day, undermined by problems in the U.S. subprime mortgage market.
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Consumer nations have called for more oil because prices are approaching record levels, but the Organization of the Petroleum Exporting Countries is showing no sign of easing output restraint.
Saudi Arabia and other OPEC members said they are not to blame for near-record prices and see no need to pump more oil.
The kingdom's oil minister, Ali al-Naimi, said there was a good balance between supply and demand, but tightness in supply of refined oil products such as gasoline, plus international political tensions were helping to push prices higher.
You can't put oil on the market without a buyer, he told reporters in Warsaw. Nobody today is looking for additional crude because all you have to do is look at the level of inventories which are in a very, very comfortable position.
Energy analysts have said speculative and institutional money pouring into crude oil futures is a major factor in Brent's more than $6 rise since late July and in U.S. crude's advance towards $73.
With speculative funds having close to record long positions, volatility is ahead as WTI (U.S. crude) is clearly in their hands, said Olivier Jakob, of oil consultancy Petromatrix.
(Additional reporting by Jane Merriman in London)