Investing.com - Oil prices were down sharply in European trade on Wednesday, as market players awaited fresh weekly information on U.S. stockpiles of crude and refined products.
The U.S. Energy Information Administration will release its weekly report on oil supplies at 14:30GMT, or 10:30AM ET, Wednesday amid expectations for a drop of 1.025 million barrels.
Gasoline inventories are expected to decline by 1.063 million barrels while stocks of distillates, which include heating oil and diesel, are forecast to rise by 513,000 barrels, according to analysts.
After markets closed Tuesday, the American Petroleum Institute said that U.S. oil inventories rose by a surprising 2.1 million barrels in the week ended August 5. It also showed a decline of 4.0 million barrels in gasoline stocks.
Meanwhile, investors looked ahead to a monthly report from the Organization of Petroleum Exporting Counties due later in the session to gauge global supply and demand levels.
OPEC’s official report is expected to show that supply from the 14-member cartel has risen to a nearly eight-year high 33.41 million barrels per day in July from 33.31 million in June, due to higher output in Iran and Iraq and as production rebounds in Nigeria and Libya.
Crude oil for September delivery on the New York Mercantile Exchange declined 65 cents, or 1.52%, to trade at $42.12 a barrel by 08:01GMT, or 4:01AM ET. On Tuesday, New York-traded oil futures fell 25 cents, 0.58%.
WTI crude futures are nearly 18% lower from their 2016 highs above $50 a barrel scaled in early June, as signs of an ongoing recovery in U.S. drilling activity combined with growing gasoline stockpiles weighed.
According to oilfield services provider Baker Hughes, the number of rigs drilling for oil in the U.S. last week increased by seven to 381, the sixth consecutive weekly rise and the ninth increase in 10 weeks.
The rebound in the number of rigs over the last six weeks has added to worries about a global glut of crude.
The EIA said Tuesday it expected a smaller decline of 700,000 barrels per day in U.S. crude oil production in 2016 than the 820,000 drop it forecast a month ago, citing the recent uptick in the number of rigs drilling for oil. U.S. output is now expected to reach 8.31 million barrels per day in 2017, up from a previous forecast of 8.2 million barrels per day.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for October delivery shed 60 cents, or 1.33%, to trade at $44.38 a barrel.
A day earlier, Brent prices lost 41 cents, or 0.9%, as market players remained skeptical that an upcoming meeting among major oil producers would result in any concrete actions to freeze output.
OPEC will hold an informal meeting on the sidelines of the International Energy Forum conference in Algeria next month to discuss setting new limits for oil production in an effort to stabilize the market.
However, experts were skeptical that the meeting will yield any action to reduce the global glut. An attempt to jointly freeze production levels earlier this year failed after Saudi Arabia backed out over Iran's refusal to take part of the initiative.
London-traded Brent futures are down almost 15% since peaking at $52.80 in early June, as prospects of increased exports from Middle Eastern and North African producers, such as Iraq, Nigeria and Libya, added to concerns that a glut of oil products will cut demand for crude by refiners.