Investing.com -- U.S. crude wavered in a volatile session on Wednesday but crept to fresh five-week highs, as investors reacted to an unexpected decline in domestic stockpiles last week along with further signals that Saudi Arabia could ramp up production to a new all-time record in August.
On the New York Mercantile Exchange, WTI crude for September delivery traded between $45.86 and $46.89 a barrel before closing at $46.76, up 0.18 or 0.39% on the session. At session-highs, the front month contract for U.S. crude hit its highest level since July 12. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $47.90 and $49.92 a barrel, before settling at $49.78, up 0.55 or 1.10% on the day. Brent futures last cleared $50 a barrel on July 5.
On Wednesday morning, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that U.S. commercial crude oil inventories decreased by 2.5 million barrels for the week ending on August 12. At 521.1 million barrels, U.S. crude oil stockpiles are at historically high levels for this time of year. Analysts expected a build of 950,000 last week, before adjusting their forecasts after the American Petroleum Institute reported a draw of 1.007 million on the week. The sharp drawdown halted a streak of three consecutive weekly builds.
In addition, the EIA said that total motor gasoline inventories decreased by 2.7 million barrels last week, while distillate fuel inventories increased by 1.9 million for the period. Although gasoline stockpiles have fallen by nearly 9.0 million barrels over the last three weeks, they still hover near record-highs as refineries churn out product at a rapid pace due to historically low crude prices. Meanwhile, crude output jumped by 152,000 barrels per day last week representing its largest surge in production in 15 months.
Elsewhere, investors reacted to news out of the Middle East after Reuters reported that Saudi Arabia could increase production even further heading into a closely-watched meeting in Algeria next month. On Wednesday, oil industry sources told Reuters that the Saudi kingdom began pumping oil at higher rates at the beginning of summer after holding production relatively steady over the first six months of the year. In July, Saudi output increased mildly from 10.55 million to 10.67 million bpd, hitting its highest level on record. By the end of August, Saudi output could reach as high as an average of 10.8-10.9 million bpd, the sources indicate. The production spike could give Saudi Arabia increased leverage in negotiations at the International Energy Forum's meeting in Algiers next month, where top producers could discuss coordinated efforts to stabilize global oil prices.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.15% to an intraday high of 95.04. It came one day after the index crashed by nearly 1% to an intraday low of 94.38, its lowest level since June 27. Since hitting a four-month high at 97.62 in late-July, the Dollar has retreated by more than 2%.
The index remained relatively unchanged after minutes from the Federal Reserve's July meeting depicted a fractured committee split on the timing of the U.S. central bank's next interest rate hike. Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.