By Barani Krishnan
NEW YORK (Reuters) - Oil prices fell about 2 percent on Wednesday on bets for OPEC inaction as the group's crude output grows and on technical selling after facing strong resistance around the $50 a barrel level.
Thursday's meeting of the Organization of the Petroleum Exporting Countries will likely focus on defending market share instead of propping up prices by curbing output, analysts said.
Gulf OPEC members, including Saudi Arabia, were considering reviving the idea of coordinated oil output action by major producers, a senior OPEC source said. But Iran, determined to restore its crude exports to pre-sanction levels, is unlikely to agree.
Many Middle East oil producers have ramped up deliveries to Asia in an aggressive fight for market share.
"Any hope of an OPEC agreement to curb production at this week's meeting is dissolving," said Troy Vincent, oil analyst at New York-based Clipperdata. "With the dollar down, a multi-day failure to break $50 despite strong volume is also not reflective of a bull market."
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The dollar fell about 0.5 percent, its sharpest decline in more than 2 weeks, as investors trimmed expectations for a U.S. rate hike in June. A weaker dollar typically translates into higher prices for greenback-denominated oil. [USD/]
Brent crude futures were down 80 cents, or 1.6 percent, at $49.09 per barrel by 10:42 a.m. EDT (1442 GMT), after striking an intraday low at $48.65.
U.S. crude's West Texas Intermediate (WTI) futures showed a 95 cent decline at $48.15, plumbing $47.75 earlier.
Brent and WTI hit seven-month highs above $50 on Thursday before slipping on profit-taking. They have otherwise traded in a $3-$5 range under $50 for weeks.
That trading range has persisted despite outages in crude supply due to Canadian oil sands wildfires, Venezuelan economic distress and security issues in Nigeria and Libya. The supply losses initially helped prices jump $10 a barrel, or 20 percent, between early April and May.
"For a market that was seeing higher runs and a loss of 1.2 million barrels a day of crude production from Canada, West Texas (crude) is not tight at all," said Scott Shelton, broker with ICAP in Durham, North Carolina.
"The arbs to export crude are closed and the arbs to import crude are open," he said, referring to arbitrage trades for WTI.
Data out of China also worried traders, with the official factory activity gauge showing only slight growth in May. Port congestion and an impending refinery maintenance season was meanwhile expected to weigh on crude imports.
(Additional reporting by Henning Gloystein in Singapore; editing by Meredith Mazzilli)