Oil dips on U.S. stock build, but eyes Iran

Crude oil futures fell on Wednesday as crude stockpiles rose last week for the fourth time in a row and the dollar gained, tempering investor appetite for riskier assets such as oil and industrial metals.

Trading was choppy but losses were pared briefly in early afternoon trading after President Obama, in a joint press conference with British Prime Minister David Cameron, said the window for diplomatic solution with Iran over its nuclear program was shrinking.

Obama urged Tehran to seize the opportunity of talks with world leaders to avert "even worse consequences," and also said that the United States and Britain would keep up the pressure on Iran.

The West suspects Iran of using its nuclear program to build atomic weapons, which Tehran denies. The United States and the European Union have imposed sanctions against Iran for its disputed nuclear activities, and mounting tensions between the Islamic Republic and the West have elevated crude oil prices.

"Trading has been choppy all day, but the headlines from Washington regarding Iran pulled prices briefly from the lows," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut.

By 1:50 p.m. EDT (1750 GMT), ICE Brent crude for April delivery traded in London at $125.33 a barrel, down 89 cents. It settled at $126.22 on Tuesday, the highest close for front-month Brent since April 8, 2011.

U.S. April crude was down 54 cents at $106.17.

Brent's premium against U.S. crude stood at around $19.15, after closing at $19.51 on Tuesday. It posted at a range of $19.21 to $20.01.

U.S. INVENTORIES UP

Crude stocks stored at the delivery hub in Cushing, Oklahoma, surged 2.5 million barrels to reach a nine-month high 38.7 million barrels, government data showed. Inventories there have risen for eight straight weeks, amassing the biggest eight-week gain since January 2009.

In total, crude stockpiles increased 1.8 million barrels nationally, to 347.5 million barrels, in line with the forecast in a Reuters poll.

"The build in Cushing stocks has widened Brent's premium to $20 and you're seeing the strength in the dollar discourage buying of riskier assets," said Hamza Khan, analyst at the Schork Group in Villanova, Pennsylvania.

The dollar was up 0.50 percent against a basket of currencies .DXY, hitting an 11-month high against the yen. The greenback strengthened after the Federal Reserve, in a statement issued on Tuesday following a policy meeting, painted a moderately brighter outlook for the economy.

Gains in the dollar can pressure dollar-denominated commodities by making them more expensive to consumers using other currencies.

In euro terms Brent crude oil was just below all-time highs set the previous session, piling pressure on a fragile economic recovery in Europe, which is lagging the United States and Asia.

IRAN'S STANCE,

After dallying for days, Iran on Wednesday said it welcomed the resumption of stalled nuclear talks with six world powers.

A Reuters/Ipsos poll showed on Tuesday that most Americans would support military action against Iran if there were evidence that it was building nuclear weapons, even if such action led to higher gasoline prices.

Iranian oil officials, meanwhile, showed no signs of alarm about potential international sanctions, saying their Asian customers remain loyal.

Source: REUTERS