Oil Slips Below $69 On US Product Build, Dollar

U.S. crude settled 57 cents lower at $68.67 a barrel, reversing earlier gains. London Brent crude fell 47 cents to $68.33 a barrel.

Oil prices fell on Wednesday as the stronger dollar and rising U.S. product stocks outweighed supply concerns from Nigeria.

U.S. gasoline stocks rose by 3.9 million barrels in the week to June 19, well above analysts' forecasts, as refiners cranked up output in the midst of the summer driving season.

Distillate stocks hit 10-year highs, while crude stocks showed a steep drop.

U.S. crude settled 57 cents lower at $68.67 a barrel, reversing earlier gains. London Brent crude fell 47 cents to $68.33 a barrel.

"Crude futures are back down on the weight of a stronger dollar," said Mark Waggoner, Excel Futures President from Huntington Beach, California.

"The EIA inventory report also showed large increases in gasoline and distillate stocks and that's dragging down crude."

The U.S. dollar extended gains against the euro and the yen on Wednesday after the Federal Reserve's Federal Open Market Committee left interest rates unchanged as expected but removed the warning that inflation could be undesirably low. The rising dollar can pressure commodities denominated in the greenback.

Optimism over a potential economic recovery boosting weak oil demand has lifted prices from below $40 a barrel over the past three months.

However, crude imports by No. 3 consumer Japan fell by 18.8 percent in May against last year, according to government data. EIA data showed total U.S. demand down 6.6 percent in the four weeks to June 19, compared with year-ago levels.

GEOPOLITICAL CONCERNS

Multiple militant attacks on pipelines and oil installations in OPEC member Nigeria recently have forced production stoppages at sites run by Agip, Chevron and Royal Dutch Shell, stoking supply concerns.

A senior official said Nigeria's president will propose a 60-day amnesty program for militants in the Niger Delta on Thursday, in an effort to end years of attacks on Africa's biggest oil and gas industry.

Traders were also keeping an eye on the worst civil unrest in 30 years in Iran, the world's fifth-largest oil exporter, over a disputed presidential election.

Iran's Supreme Leader Ayatollah Ali Khamenei declared on Wednesday that a disputed election result would stand.

Venezuela said OPEC was hoping for oil prices up to $75 a barrel by the end of the year, but added global inventories remained very high.

The producer group agreed a series of production cuts last year to help stem oil's slide from record highs near $150 a barrel. Kuwait's oil minister said on Wednesday the time was not right for OPEC to boost oil production, however.