Investing.com -- Crude futures fell more than 1% on Wednesday amid a lower than expected U.S. inventory draw last week and favorable polling results supporting the Leave campaign in the U.K. on the eve of a highly-anticipated Brexit vote.
On the New York Mercantile Exchange, WTI crude for August delivery traded between $48.44 and $50.52 a barrel before closing at $49.11, down 0.74 or 1.48% on the session. On the Intercontinental Exchange (ICE), brent crude for August delivery wavered between $49.20 and $51.24 a barrel, before settling at $49.88, down 0.74 or 1.44% on the day. Oil prices rallied in the final minutes of the session to pare sharp losses earlier in Wednesday's session.
Meanwhile, the spread between the international and U.S. benchmarks of crude stood at $0.77, slightly above Tuesday's level of $0.69 at the close of trading. The front month contract for U.S. crude rolled over to August on Sunday.
On Wednesday morning, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that crude inventories fell by 0.9 million last week for the week ending on June 17. At 530.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. With the slight decline, the government report defied expectations for a more sizable draw after the American Petroleum Institute (API) reported a drawdown of 5.22 million barrels on Tuesday evening. Analysts initially expected an inventory decrease of 1.5 million for the week. Total motor gasoline inventories increased by 0.6 million barrels, while Distillate fuel inventories rose moderately by 0.2 million barrels for the week.
At the Cushing Oil Hub in Oklahoma, weekly stockpiles fell by 917,000 barrels last week, falling below expectations for a draw of 1.5 million barrels. A session earlier, the API reported a decline of 1.311 million barrels at Cushing, the main delivery point for NYMEX oil. At the same time, data services firm Genscape, Inc. reported a considerable build in inventory levels in the euro zone, pushing stockpiles to their highest level in three years. It comes as storage levels at Cushing, the largest oilfield in the U.S., remain close to full capacity.
For the week, production fell by 39,000 barrels per day to 8.677 million bpd, hovering near lows from September, 2014. As U.S. shale producers have been forced offline due to persistently low prices, weekly output in the U.S. has moved lower in 21 of the last 22 weeks. By comparison, domestic production peaked at 9.604 million bpd this week last year, its highest level in four decades.
In the U.K., markets braced for widespread volatility in the coming days, hours before polls open in Thursday's Brexit referendum. After the close of trading in the euro area on Wednesday, the "Leave" campaign surged ahead by a small margin in two closely-watched public opinion polls. A poll from Opinium showed that the Exit vote had taken a slight 45-44% lead, while a TNS survey found that the Leave camp jumped in front by a 43-41% margin, with 16% undecided. Still, British sportsbook Ladbrokes (LON:LAD) placed the probability of Remaining at 73% based on its live odds, down slightly from a 76% chance earlier this week.
A vote supporting Britain's departure from the European Union could complicate free travel arrangements for U.K. workers employed abroad by foreign oil companies. GBP/USD stood at 1.468 in U.S. afternoon trading, lingering near five-month highs.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.45% to an intraday low of 93.50, remaining near one-month lows. The index is down by more than 5% since early-December.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
Elsewhere, Saudi Arabia energy minister Khalid al-Falih indicated on Wednesday's that the world's largest exporter could resume its role of helping rebalance the market once the global oil downturn abates. Last month, Saudi Arabia increased production by 84,000 bpd to 10.241 million bpd, as the Kingdom's output remained near record all-time highs.
Crude futures are down more than 30% since OPEC rattled global energy markets with a strategic decision to maintain its production ceiling above 30 million barrels per day in November, 2014. Last Friday, the front month contract for WTI crude was priced at $48.00 a barrel, $11.62 below its price at the same time last year, according to the EIA.