Investing.com -- Crude futures fell sharply on Wednesday to fresh 3-month lows, as U.S. crude stockpiles unexpectedly moved higher last week defying expectations for a slight draw on the week.
On the New York Mercantile Exchange, WTI crude for September delivery traded between $41.69 and $43.20 a barrel before closing at $41.95 down down 0.97 or 2.26% on the session. With the considerable losses, WTI closed at its lowest level since April 19. The front month contract for U.S. also slipped below a key technical level of $42, providing further risks to the downside. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $43.77 and $45.33, a barrel, before settling at $43.91, down 1.31 or 2.90% on the day.
Crude futures have crashed approximately 9% in the last week and roughly 20% since reaching 10-month highs in early-June.
On Wednesday morning, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that U.S. Commercial Crude inventories increased by 1.7 million barrels from the previous week. At 521.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Analysts expected a draw of 2.257 million barrels on the week, while the American Petroleum Institute reported a decrease of 827,000 on Tuesday evening after the close of trading. U.S. crude inventories declined in each of the previous nine weeks before last week's build.
In addition, the EIA reported an increase of 452,000 barrels in gasoline inventories, while distillate fuel inventories fell by 780,000 barrels on the week. Analysts expected to see gains of 36,000 and 714,000 in gasoline and distillate fuel stockpiles respectively. Gasoline inventories have remained far above seasonal averages in recent weeks, as a spike in refinery activity has outpaced demand during the pivotal summer driving season.
Meanwhile, U.S. crude production rose by 21,000 barrels per day last week to 8.515 million bpd, increasing for the third consecutive week. As oil rigs throughout the country have returned back online in recent weeks, increased production levels have dragged down future crude prices.
Crude futures also remained relatively unchanged after the Federal Reserve left short-term interest rates unchanged on Wednesday for a fifth consecutive meeting. Any rate hikes by the Fed this year are viewed as bullish for the dollar as foreign investors pile into the greenback in order to capitalize on higher yields.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell slightly following the Fed's release to 96.78, down 0.40% on the session. The index still remains near four-month highs.
Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.