Investing.com -- U.S. crude futures plunged to fresh six-and-a-half year lows before paring some losses in the afternoon session, following the strongest build in U.S. crude inventories in four months.
On the New York Mercantile Exchange, WTI crude for October delivery traded in a broad range between $40.97 and $43.17 a barrel, before settling at $41.23, down 1.89 or 4.37% on the session. Over the last month, Texas Long Sweet futures have declined by more than 21%, amid a continued glut of oversupply on global markets.
On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $46.83 and $49.10 a barrel, before closing at 47.10, down 1.71 or 3.50% on the day. The spread between the international and U.S. benchmarks of crude, meanwhile, stood at 5.87, above Tuesday's level of 5.72 at the close.
On Wednesday morning, the U.S. Energy Information (EIA) said in its Weekly Petroleum Status Report that U.S. crude stockpiles increased by 2.6 million for the week ending on August 14, marking its highest weekly build since April. At 456.2 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.7 million barrels last week, and are in the middle of the average range, the EIA said in a report. At the Cushing Oil Hub in Oklahoma, the main delivery point for NYMEX crude oil, inventories increased by 300,000 barrels for the week.
A week earlier, U.S. crude stockpiles decreased by 1.7 million, in line with analysts' expectations for a 1.6 million draw. The draw was preceded by a 4.4 million decline for the week ending July 31, as crude production across the U.S. continues to level.
In spite of last week's inventory build, output continues to decline as U.S. shale production levels off. During the week, U.S. crude production fell by 47,000 barrels to 9.348 million barrels per day, around its lowest level since early-May. U.S. crude output still remains near its highest level in more than 40 years. The most fertile U.S. shale fields, however, project that output will decline in September for a fifth consecutive month.
In this week's report the EIA said WTI crude fell to $42.45 per barrel at the end of last week, $54.85 below its price during the same week in 2014. Crude futures are down more than 50% since OPEC triggered a prolonged battle for global market share last November with a strategic decision to keep its production ceiling above 30 million barrels per day.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, inched up to 96.53, minutes after the release of the Federal Open Market Committee's minutes from its July meeting on Wednesday. Shortly before the announcement, the index fell to an intraday low of 96.46, down more than 0.50% on the session. The minutes provided no clear indication on whether the FOMC will decided to raise short-term interest rates at its next meeting in mid-September.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.