Oil prices tumbled on Thursday as concerns over a strong dollar, along with a large increase in US crude inventories and weak demand, outstripped potential supply disruption.

The Brent crude oil futures contract failed to hold its previous gains and fell 23 cents, or 0.2%, to $93.87 a barrel as of 0636 GMT. West Texas Intermediate (WTI) crude was down 9 cents, or 0.1%, to $88.39.

Data released by the Energy Information Administration (EIA) showed that US crude and distillate stockpiles increased more than expected in the past week, fuel demand weakened and oil prices capped.

The stronger dollar was a headwind for oil demand as dollar-denominated commodities, including crude oil, became more expensive for buyers of other currencies. The dollar index rose 0.2%, close to its latest high on Thursday.

Meanwhile, analysts say prospects for further US rate hikes will continue to cloud the market and limit the recovery in oil prices.

However, the increased likelihood of US railroads stalling due to an ongoing business dispute is giving the market a boost. The three unions are negotiating a new contract that could affect rail shipments important for crude oil and product deliveries.

In fact, the price of oil is priced in a global recession, but even if global growth is steady, oil demand is likely to remain quite strong compared to continued supply concerns.

The International Energy Agency (IEA) said on Wednesday it expects a widespread shift from gas to oil for heating purposes, saying demand for additional oil will average 700,000 barrels per day (bpd) from October 2022 to March 2023, double the level a year ago. That, along with overall expectations for weak supply growth, also helped boost the market.

Sources familiar with plant operations said TotalEnergies SE cut production Wednesday at its Port Arthur, Texas refinery, which is producing 238,000 barrels per day (bpd).