By Barani Krishnan
NEW YORK (Reuters) - Oil fell 2 percent on Thursday, wiping out gains from the past two sessions, as euphoria from the first U.S. inventory drawdown in months faded and focus returned to oversupplies in crude and gasoline.
A stronger dollar also weighed on the energy complex, making raw materials became less affordable to holders of the euro and other currencies.
North Sea Brent and U.S. crude futures fell more than $1 a barrel, pressured partly by gasoline's sharpest one-day drop in more than two weeks.
U.S. crude inventories fell almost 4 million barrels last week, their first weekly decline since January, government data showed on Wednesday. But crude stockpiles still stood at a discouragingly-high 487 million barrels. While weekly demand for gasoline was higher, stocks of the fuel also rose despite the approach of the peak U.S. driving season.
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"There is some disappointment out there that the fundamentals for gasoline and oil products aren't improving as quickly as some people would like, to provide support for the broader rally in crude that we've been seeing," said Carl Larry, director of business Development for oila and gas at Frost & Sullivan.
Brent futures were down $1.56 at $66.21 a barrel by 11:10 a.m. EDT (1510 GMT), losing all they gained on Tuesday and Wednesday.
U.S. crude futures fell $1.40 to $59.53 a barrel.
Gasoline futures were down 44 cents, their most in 16 days, to trade below $2 a barrel.
Stronger-than-expected demand growth and a slowdown in U.S. crude supply have boosted oil prices by 50 percent from a six-year low hit in January.
Physical markets, however, are showing a weaker underbelly, crude traders said, pointing to tens of millions of West African, Azeri and North Sea barrels struggling to find buyers.
"While the latest draw and the recent slowdown in weekly builds in crude stocks have been seen as positive for the oil price, crude stocks remain exceedingly high," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
The world's biggest crude exporters will group in Vienna next month for a meeting of the Organization of the Petroleum Exporting Countries.
A senior OPEC delegate said the group will likely stick to its November strategy of retaining output to defend market share despite analysts saying sharp output cuts are needed to boost oil's fundamentals.
The delegate told Reuters that OPEC might want "to bring major non-OPEC producers to the table" instead, to help balance the market.
(Additional reporting by Himanshu Ojha and Christopher Johnson in London, and Jacob Gronholt-Pedersen and Henning Gloystein in Singapore; Editing by William Hardy and Andrew Hay)
