Oil down on U.S. refinery maintenance, OPEC doubts

By Barani Krishnan

NEW YORK (Reuters) - Oil prices fell on Thursday, with U.S. crude retreating from three-month highs as refinery maintenance threatened to further raise record U.S. inventories of crude, while sources said an OPEC production freeze meeting was unlikely without Iran's participation.

Crude prices pared losses as the dollar weakened. <.DXY> Oil buyers using the euro > benefited from its rally after the European Central Bank (ECB) ruled out further rate cuts after bringing its key lending rate to zero.

Global oil benchmark Brent was down 90 cents at $40.17 a barrel by 12:58 p.m. EST (1758 GMT), off the session low of $39.63.

 

U.S. crude slid 40 cents to $37.89 per barrel, having recovered from an intraday low of $37.21.

On Wednesday, oil rallied as much as 5 percent, with U.S. crude hitting three-month highs of $38.51 a barrel as a big gasoline inventory drawdown overshadowed record high crude stockpiles.

On Thursday, some analysts said last week's gasoline stock draw, which was triple expectations, could be partly due to the market transitioning from winter-grade to summer-grade motor fuel. They also said the U.S. refinery maintenance season could push crude stockpiles to even bigger highs.

Some analysts fear that despite the big U.S. draw, gasoline stocks remained high on both sides of the Atlantic, which could undercut a sustained recovery in oil prices. Crude's 30 percent rise in the last month was partly based on hopes that drivers would soak up the surfeit in the fuel.

"The gasoline drawdown is great but we still have record high crude stocks. The question is whether we are just going to depend on falling U.S. production to bring that down, or OPEC will also get its act together on an output freeze," said David Thompson at Washington-based commodities brokerage Powerhouse.

A meeting between oil producers to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter said, noting that OPEC member Iran had yet to say whether it would participate in such a deal.

"The idea that meeting may not happen at all is definitely weighing on the market," said Tariq Zahir, who mostly trades U.S. crude oil spreads for Tyche Capital Advisors in New York.

(Additional reporting by Sarah McFarlane in LONDON and Henning Gloystein in SINGAPORE; Editing by Marguerita Choy and David Gregorio)