By Jenny W. Hsu 
 

Oil prices eased slightly in Asian trade Thursday amid a rising dollar after crude witnessed some of its biggest gains in nearly two months during the U.S. session.

That bounce, which allowed futures to settle at three-week highs overnight, was stoked by data from the U.S. Energy Information Administration showing a larger-than-expected decline in gasoline and distillate supplies as well as refiners processing oil at a higher rate.

"The big falls in gasoline inventories, coming near the end of the refinery-maintenance season, suggest crude-oil inventories are on the cusp of declining," said ANZ Research. Crude-oil stockpiles rose a less-than-expected 900,000 barrels last week by the government's count.

Prices were also propelled by declining U.S. oil imports and rising exports. "The trending combination of higher crude runs and lower net crude imports should result in U.S. crude stocks flattening and then starting to decline by the end of April," said Societe Generale.

Futures initially built on those gains in Asia, but reversed that move as the dollar climbed Thursday morning on expectation that U.S. central bank may increase the frequency of interest rate increases this year. A stronger dollar often deters crude buying for traders holding foreign currencies.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in May recently traded down 4 cents at $49.47 a barrel in the Globex electronic session. May Brent crude on London's ICE Futures exchange fell 11 cents to $52.31. The WSJ Dollar Index which compares the greenback to 16 currencies was recently up 0.2% to 92.91.

However, the ongoing strong uptrend in U.S. crude production is keeping investors from placing bullish bets. Data showed that despite the recent pullback in prices, domestic output rose for a fifth-straight week.

JBC Energy said that given prices have been bobbing in a narrow range, the growth in U.S. oil-drilling activity seen so far this year may lose steam over the next few months. But that doesn't mean less production because new rigs are much-more efficient as they can drill more oil in less time.

"Rising U.S. oil output remains the key downside risk to oil prices over the next year," said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia.

This, of course, as the market continues to await whether recent production cuts led by the Organization of the Petroleum Exporting Countries will be extended beyond the initial six-month term when the cartel meets to review at the end of May, and to what degree they are cutting into bloated global supplies.

"With plenty of supportive OPEC chatter on rolling over the oil-production restrictions and a production accord between Russia and Iran, the consensus view that the physical market should tighten in the latter half of the year is building," said Stuart Ive, a client manager at the Wellington-based OM Financial.

Nymex reformulated gasoline blendstock for April--the benchmark gasoline contract--eased 0.38 cent to $1.6682 a gallon, April diesel dropped 0.33 cent to $1.5392 and ICE gas oil for April rose $1 from Wednesday's settlement to $464.75 a metric ton.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

March 29, 2017 23:41 ET (03:41 GMT)