Investing.com -- Crude futures fell considerably on Wednesday extending slight losses from the previous session, as investors reacted to an unexpected build in U.S. crude inventories last week and a bullish forecast from OPEC on the potential for increased global demand growth for the remainder of 2016.
On the New York Mercantile Exchange, WTI crude for September delivery traded between $42.51 and $43.48 a barrel before closing at $42.66, down 1.04 or 2.43% on the session. The front-month contract for U.S. crude still remains sharply below its level in early-June when it surged above $50 a barrel, amid a host of production slowdowns worldwide. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $44.80 and $45.73 a barrel, before settling at $44.87, down 0.89 or 1.98% on the day. Both the U.S. and international benchmarks of crude closed near session-lows, following a late sell-off before the close.
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 1.1 million barrels for the week ending on August 5 from the previous week. At 523.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Analysts initially anticipated a draw of 1.5 million barrels for the week, but adjusted their expectations following a 2.09 million increase from the American Petroleum Institute on Tuesday evening after the close of trading. The sizable build marked the largest from the API over the last three months. At the same time, stockpiles at the Cushing Oil Hub in Oklahoma surged by 1.16 million barrels for the week, also representing the largest weekly build since early-May. Cushing, the main delivery point for NYMEX oil, is the largest storage facility in the U.S. Given the current supply backdrop on U.S. markets, any inventory builds are viewed as bearish for crude prices as storage facilities nationwide remain near full capacity.
Notably, total motor gasoline inventories decreased by 2.8 million barrels last week while distillate fuel inventories increased by 2.0 million barrels on the week. Although gasoline stockpiles have declined by more than 6.0 million barrels over the last two weeks, inventories worldwide still hover near record-highs as refineries churn out product at a rapid pace due to historically low crude prices. Meanwhile, inventories in the PADD 1 region, which comprises the majority of the U.S. east coast, fell mildly by 0.4 million to 70.9 million barrels, remaining near their highest levels on record.
Elsewhere, OPEC said on Wednesday in its monthly report for August that it expects global oil demand growth in 2016 to average 1.22 million barrels per day, an increase of 30,000 bpd from the previous estimate. OPEC, the world's largest oil cartel, also left its 2017 forecast unchanged at 1.15 million bpd. Earlier this week, OPEC president Mohammed bin Saleh al-Sada attempted to calm markets by hinting that top producers from the 14-member organization could discuss options on the sidelines of an energy forum in Algeria in September aimed at stabilizing persistently low crude prices. For the month, production in Saudi Arabia increased to a record-high of 10.67 million bpd outweigh decline in Venezuelan output, which fell to a 13-year low of 2.1 million bpd.
Although oil prices are up sharply from their levels in February when they touched down to 13-year lows, crude futures are still down more than 60% from their peak of $115 a barrel two summers ago. Months later, OPEC triggered an unforeseen shock with a strategic decision to maintain its production ceiling above 30 million barrels per day, helping flood markets with a glut of oversupply.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.50% to an intraday low of 95.38. The index has tumbled more than 1.5% since hitting four-month lows in late-July. Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.