U.S. crude dips on fear big stock drawdowns won't continue; Brent up

NEW YORK (Reuters) - Oil prices were mixed on Thursday, with Brent (brent.167)up slightly and U.S. crude hovering near one-month lows, on concerns the rate of weekly drawdowns in U.S. crude stocks will not last.

The U.S. Energy Information Administration (EIA) said crude oil inventories fell by 2.8 million barrels last week, ahead of Monday's Memorial Day holiday, which unofficially kicks off the peak driving season in the United States. [EIA/S]

Going by EIA data, it was a fourth straight week of declines in domestic crude stocks.

Analysts polled by Reuters had expected a drop of just 857,000 barrels for last week. Industry group American Petroleum Institute had estimated a build of around 1.3 million barrels. [API/S]

U.S. crude futures, which were down earlier in the session on the dollar's <.DXY> strength, pared losses briefly after the EIA data. But the market soon went deeper into the red on worries the trend will not hold.

"To me, I need to see more of these draws each week," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

"Otherwise it could be just the case of higher demand ahead of a holiday weekend that goes away once that period is over," he said.

U.S. crude was down 35 cents, or 0.6 percent, at $56.16 a barrel by 1:08 p.m. EDT (1708 GMT), after plumbing an April 29 low at $56.51.

Brent was 12 cents higher at $62.18, versus a session low at $61.24.

Prices of oil products were also mixed. Gasoline rose 1 percent after a 3.3 million barrel draw in the fuel versus forecasts for a drop of around 400,000 barrels.

Ultra-low sulphur diesel was almost flat after a 1.1 million barrel build in distillate stocks versus a draw of 248,000 barrels in heating oil.

Oil prices had fallen about 3 percent in the past two sessions on the strength of the dollar. A stronger greenback makes dollar-denominated commodities, including oil, less affordable in other currencies.

In Thursday's session, the drop in U.S. crude was limited somewhat by Canadian wildfires that forced the evacuation of several oil and gas sands production sites "the previous day," raising questions about North American crude supplies.

The fires shut in 233,000 barrels per day of production, or roughly 10 percent of total Canadian oil sands production out of Alberta, the largest source of U.S. oil imports.

(Additional reporting by Christopher Johnson in London and Henning Gloystein and Florence Tan in Singapore; Editing by David Evans and Bernadette Baum)

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