(Reuters) - Oil fell on Wednesday on concerns about the health of the European and U.S. economies and as the dollar rose against other currencies following a higher-than-expected U.S. inflation report. Doubts also grew over the outlook for fuel demand in the United States ahead of U.S. government data later on Wednesday and after industry data showed on Tuesday stockpiles of gasoline in the world's top oil consumer rose. North Sea Brent crude oil futures for July, due to expire at the close of trade on Wednesday, fell more than $2 per barrel to a low of $118.00 after hitting its highest in more than five weeks in the previous session. By 1335 GMT, Brent was at $117.45 a barrel and July U.S. crude futures were 41 cents lower at around $98.96 a barrel. U.S. core consumer inflation rose more than expected in May to post its largest increase in nearly three years, which could prompt the Federal Reserve to increase rates sooner rather than later. A separate report also showed manufacturing in New York State unexpectedly contracted. "The New York manufacturing data renewed worries about whether the economy is slowing and the Greece debt problem is simmering out there and pressuring the euro, strengthening the dollar," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. "We may be setting up for a test of key support at $95 (for U.S. crude)," he added. Euro zone ministers failed on Tuesday to reach agreement on how private holders of Greek debt should share the costs of a new bailout, putting the onus on the leaders of Germany and France to forge a deal later this week. The euro fell 1 percent against the dollar on Wednesday and the dollar strengthened by over one percent against a basket of currencies. BRENT-WTI U.S. gasoline inventories rose by 1.1 million barrels last week, industry group American Petroleum Institute said, their sixth consecutive gain and in line with forecasts. That moderated the bullish effect of a drop in crude stockpiles, which fell 3 million barrels, twice as much as expected. Brent's premium over U.S. benchmark crude slipped below $20 per barrel, down from Tuesday's record of $22.79 a barrel. Traders attributed the fall to selling ahead of the expiry of the July Brent contract later on Wednesday and said the spread could widen again later. Barclays Capital's technical team said it expected the Brent-WTI spread to widen to as much as $24 per barrel in what it suggested was a bullish market for the North Sea contract. "We look for the WTI/Brent spread to extend widening toward our target near $24 before easing toward the $19 area," it said. U.S. retail gasoline demand climbed slightly last week from a year earlier, by 0.2 percent, a second consecutive rise as pump prices continue to ease, a report by MasterCard Advisors' SpendingPulse showed on Tuesday. Gasoline demand broke a near two-month long slump in the first week of June with data that included the Memorial Day weekend, marking the start of the summer driving season, showing demand rising 0.5 percent from a year ago. But over the latest four weeks, average U.S. gasoline consumption was down 1 percent from year-earlier levels. Government data on U.S. oil inventories and demand was due later on Wednesday from the Energy Information Administration. (Additional reporting by Alejandro Barbajosa in Singapore, editing by Keiron Henderson)

Source