LONDON (Reuters) - Oil markets fell on Wednesday as an unexpected rise in U.S. crude inventories and a strengthening dollar set investors on a more cautious path ahead of the $70 a barrel mark.
U.S. light, sweet crude was down $2.00 at $66.55 a barrel by 1534 GMT, off an earlier peak of $68.95. ICE Brent crude was down $1.93 at $66.24 a barrel.
Crude oil inventories in the United States jumped last week by 2.9 million barrels due to increased imports, data released by the Energy Information Administration showed, vs. a Reuters poll that forecast a draw of 1.4 million barrels.
"The rising crude number caught everyone wrong-footed," said Addison Armstrong, director of research at Tradition Energy in Connecticut.
"The rise in imports was sizable, but I'm not really sure where the demand is coming from. It looks like the oil went into storage," Armstrong said.
SAUDI ASSURANCES
U.S. President Barack Obama flew on Wednesday to Saudi Arabia, the world's largest oil exporter, where he said he would raise the issue of price volatility with King Abdullah and indicate no halt to the need for oil imports.
"The Saudis want to be assured that there will be a future for oil consumption. They want security of demand," said Simon Wardell, senior oil analyst at Global Insight in London.
"Obama for his part will be persuading them to continue investing in new production, which is not likely to have too much impact on spot prices in the near term, but will come five or 10 years down the road," Wardell said.
The dollar, which in its weakness had sparked risk appetite for investors into other assets, including a resurgent crude market, recovered from its lowest levels of 2009 against the euro after monetary sources in Asia said they would keep buying U.S. Treasuries, even if the U.S. credit rating were to be cut.
U.S. front month crude prices broke above an important 200-day moving average price level last Tuesday, and had closed higher every day since until the last session, when the market finished down 3 cents.
"The strong influence has been the breakout of the 200-day moving average last week, which has brought the market higher ever since," said Olivier Jakob, an oil analyst at Swiss-based PetroMatrix.
"We are very close to this psychological $70 level, and the bulls can afford a slight retracement and still keep their bullish trend," said Jakob.
