Investing.com -- Crude futures bounced off near-six week lows on Wednesday, amid heavy short covering, as the long-term ramifications of a U.K. departure from the European Union and persistent oversupply concerns remained in focus.
On the New York Mercantile Exchange, WTI crude for August delivery traded between $45.94 and $47.66 a barrel before closing at $47.35, up 0.75 or 1.63% on the session. On the Intercontinental Exchange (ICE), brent crude for September delivery wavered between $47.18 and $49.08 a barrel, before settling at $48.69, up 0.74 or 1.59% on the day. It came one day after the U.S. and international benchmarks of crude suffered one of their worst sessions since February, following reports of supply increases in both the U.S. and Saudi Arabia. The front month contract for crude is now trading near post-Brexit levels from late-June when it plunged nearly 8% during a massive two-day sell-off.
Despite the recent downturn, U.S. crude futures are still up by more than 70% from their level on February 11 when they tumbled to 13-year lows at $26.05 a barrel.
Energy traders continued to monitor developments in the U.K. after two additional commercial property firms froze their funds on Wednesday, citing exceptional liquidity pressures in the wake of the Brexit vote. It followed similar moves by M&G Property Portfolio, Aviva (LON:AV) and Standard Life (LON:SL) in recent days. The threat of a recession throughout the euro area could restrain demand for crude in the U.K. Continental Shelf (UKCS), where approximately 590,000 barrels are pumped each day.
At the same time, crude prices remain under pressure from unrelenting worries regarding the massive supply glut on global energy markets. In Tuesday's session, crude prices slid more than 4% after a Bloomberg survey showed that OPEC production increased by 240,000 bpd in June to 32.88 million bpd. For the month, production in Saudi Arabia surged 70,000 bpd to 10.33 million bpd, remaining near all-time highs. The production spike matched seasonal trends, amid demands for increased crude output in order to generate enough electricity to power air conditioners throughout the Kingdom.
In the U.S., data intelligence firm Genscape, Inc. reported an unexpected build of 230,026 barrels at the Cushing Oil Hub for the week ending on July 1. The mild increase defied expectations after U.S. crude production fell sharply a week earlier for the 22nd period in 23 weeks. The American Petroleum Institute will release its weekly inventory report on Wednesday afternoon following the close of trading. The report will come out one day later than usual this week due to the Fourth of July holiday.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, pared earlier gains after hitting an intraday high of 96.62. In U.S. afternoon trading, the index stood at 96.13, down 0.14 or 0.15% on the session. Although the index is up by more than 2.5% since the Brexit outcome, it is still down approximately 4% from its peak of 100.55 in early-December.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
Crude futures have fallen by more than 50% since hitting a peak at $115 a barrel in June, 2014.