Oil edges lower despite weak dollar as U.S. stockpiles remain high

By Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices slipped on Thursday, as support from a weaker dollar was offset by a stubbornly high level of U.S. inventories near record levels that suggested OPEC-led output cuts were starting to drain supplies.

The Organization of the Petroleum Exporting Countries and some non-OPEC producers cut production from Jan. 1 to reduce record stocks of crude. But an oil price rally after the deal has been hobbled by data showing persistently rising U.S. stockpiles.

Prices were pressured by data from market intelligence firm Genscape showing a build of more than 2 million barrels in the week to March 14 at the Cushing, Oklahoma delivery point for U.S. crude futures, traders said.

Data on Wednesday showing a modest slide in crude stockpiles in the United States, the world's biggest oil consumer, had helped lift oil prices after a week-long rout pushed them to three-month lows.

The U.S. Energy Information Administration said on Wednesday that crude inventories fell last week, the first decline after nine weeks of increases, but only a dip of 237,000 barrels from a record high. It also reported Cushing stocks jumped 2.13 million barrels in the week to March 10.

Brent crude was 9 cents lower at $51.72 a barrel by 12:51 p.m. EDT (1651 GMT), recovering from Tuesday's drop to $50.25, its lowest since Nov. 30 when OPEC announced its supply accord. The price is still nearly $7 below January's post-deal peak of $58.37.

U.S. light crude was down 14 cents at $48.72 a barrel, still above the three-month low hit on Tuesday.

But some analysts were bullish.

"Market focus remains centered on escalating U.S. production growth and elevated domestic inventory levels, but this is not representative of the rest of the world. Inventories are drawing in several other key regions," RBC Capital Markets analysts said in a note.

"Despite the broad-based headlines of a holistic global oil surplus, we contend that certain markets such as Asia remain in a deficit, while regions like the Atlantic Basin and the U.S. remain in surplus."

Some support came from the U.S. Federal Reserve on Wednesday after it signalled it would not accelerate plans to raise interest rates, depressing the dollar against a basket of currencies and lifting the greenback-denominated oil price.

"I don't think that's going to be a massive influence at this point in time and the main reason being that it is a small move and the risk trade is still on at this point," said Mark Watkins, regional investment strategist at the Private Client Group at U.S. Bank in Park City, Utah.

"Unless there is a global disruption where money needs to move to a safe haven, the interest rate movement isn't going to have a long term material impact at this point in time."

(Additional reporting by Edmund Blair in London, Aaron Sheldrick in Tokyo; Editing by Marguerita Choy and Dale Hudson)