Investing.com -- Crude futures dropped considerably on Wednesday halting a two-day rally, as developments in Iranian nuclear talks and a continued decline in U.S. crude stocks weighed.
On the New York Mercantile Exchange, WTI crude for August delivery slid 0.76 or 1.25% to 60.25 a barrel. For the day, Texas Long Sweet futures wavered between 59.81 and 61.51 after falling sharply from near-session highs in U.S. morning trading. Still, Wednesday's intraday high marked its strongest level in more than three weeks.
On the Intercontinental Exchange (ICE), brent crude for August delivery dipped 0.96 or 1.49% to 63.49 a barrel. Brent futures briefly ticked above $65 a barrel before dropping significantly in the European afternoon trading session.
Crude prices plunged after the U.S. Energy Information Administration said in its Weekly Petroleum Status Report that crude inventories nationwide fell by 4.9 million barrels last week, marking the eighth consecutive report of weekly declines. The draw reduced U.S. crude stockpiles to 463.0 million barrels, a level not seen for this time of year in at least 80 years. Analysts had expected a draw in the range of 2 to 3 million barrels following the American Petroleum Institute's weekly supply report on Tuesday evening.
While the significant draw should be considered bullish for WTI crude futures, crude stockpiles typically diminish at this time of year during the peak of the summer driving season. Refineries operated at 94.0% of their operable capacity for the week ending on June 19, up slightly from 93.1% a week earlier, as disruptions from Tropical Depression Bill weighed.
Production, meanwhile, rose by 76,000 barrels per day in the 48 lower states to 9.187 million bpd. Industry observers are placing a close eye on output as the U.S. remains embroiled in a protracted battle with Opec for global market share.
Elsewhere, Rep. Ed Royce (R, California), Chairman of the House Foreign Affairs Committee, issued a warning to his colleagues in the House of Representatives following the latest development in Iran Nuclear talks. New reports indicate that an accord is set to offer Tehran high-tech reactors and convert Iran's underground facility at the Fordow Fuel Enrichment Plant (FFEP), according to a statement issued by Royce's office. The two sides are facing a June 30 deadline for a final agreement in the lengthy negotiations.
"The Obama Administration is dropping its bottom-line by the day. This morning it’s reported that Fordow will be used for isotope production," Royce said in a statement. "While we once demanded that this hardened mountain-top facility be shut, we are now on the verge of accepting technology there that can quickly be re-engineered for bomb-making fuel."
A comprehensive deal is viewed as bearish for crude, as an easing of economic sanctions could release an outflow of oil into a global market already saturated by oversupply. Since the sanctions were levied several years ago, crude exports from Iran have been restricted to roughly one million barrel per day. If sanctions are lifted, Facts Global Energy, an energy consulting firm, forecasts that the Iranian oil exports could reach a level of 1.7 million barrels per day within 12 months.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell 0.14% to 95.47. A day earlier, the dollar enjoyed one of its strongest sessions of the year spiking more than 1.2%.