By Barani Krishnan
NEW YORK (Reuters) - Oil fell on Wednesday as a resurgent dollar weighed on crude prices ahead of inventory data expected to show whether U.S. fuel demand was accelerating from a peak U.S. driving season under way.
Other factors held little sway over the market, including France's warning to Iran that it was ready to block a final deal on Tehran's nuclear programme unless Iran provided full access to inspectors. Iran needs the nuclear deal to unlock Western sanctions on its crude exports.
The American Petroleum Institute (API), an industry group, will issue at 4:30 p.m. EDT (2030 GMT) estimates on crude and oil products in storage ahead of Thursday's official data from the U.S. government.
Analysts polled by Reuters forecast on the average a 2 million barrel draw in crude stocks last week, marking a fourth consecutive week in inventory declines.
But some traders think crude stocks may have actually risen last week even as demand for gasoline accelerated in the run-up to Monday's Memorial Day holiday, which marks the start of heavy road travel across America that often lasts through the summer.
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"If you're looking for a catalyst for price recovery from this data, you may not really get it, and that's why the dollar's been exerting it's strength over oil," said John Kilduff, a partner at New York-based commodities fund Again Capital.
Speculation about the first U.S. interest rate hike in years sent the dollar soaring against major currencies before it pared gains. A stronger greenback makes dollar-denominated commodities, including oil, less affordable in other currencies.[FRX/]
North Sea Brent crude was down $1.55, or 2.4 percent, at $62.17 a barrel by 2:25 p.m. EDT (1825 GMT).
U.S. crude settled down 52 cents, or 1 percent, at $57.51 a barrel.
Both fell nearly 3 percent on Tuesday, also pressured by the dollar.
API's inventory estimates are delayed from their routine Tuesday release because of the Memorial Day holiday. The government's Energy Information Administration will also publish a day late, at 11 a.m. EDT (1500 GMT) on Thursday. [API/S]
Kilduff said he expects crude stocks to have risen by about half a million barrels last week in spite of a 2-million-barrel draw in gasoline.
Chicago-based Ritterbusch & Associates, a contributor to the Reuters poll, expects a crude build of nearly 2 million barrels and a gasoline draw of 0.8 million barrels. Citi Futures forecast a 2.5 million barrel draw in crude and a 1 million barrel build in gasoline. [EIA/S]
(Additional reporting by Himanshu Ojha in London and Florence Tan in Singapore; Editing by Dale Hudson, David Goodman and Meredith Mazzilli)