Investing.com -- U.S. crude futures surged more than 8% on Wednesday, amid a severely weakening dollar, as energy traders shrugged off a considerable build in U.S. crude futures in favor of growing support for an emergency OPEC meeting aimed at addressing longstanding concerns related to excessive supply.
On the New York Mercantile Exchange, WTI crude for March delivery traded in a broad range between $29.41 and $32.34 a barrel, before settling at $32.28, up 2.40 or 8.03% on the day. U.S. crude futures rallied one day after closing below $30 for the first time in more than a week, as optimism of a high-level meeting between Russia and Saudi Arabia faded. The prospects of a meeting triggered a major rally last week, amid reports that the oil powers could slash production as much as 5%.
WTI crude is still near its 12-year low from late last month when it slid below $27 a barrel to fall to its lowest level since 2003.
On the Intercontinental Exchange (ICE), brent crude for April delivery wavered between $32.30 and $34.98 a barrel, before closing at $35.04, up 2.32 or 7.09% on the session. North Sea brent crude followed a five-day winning streak from last week by tumbling by approximately $3 a barrel during the prior two sessions. Last Friday, brent crude eclipsed $36 a barrel, capping a 25% rebound. The international benchmark also hit its lowest levels since 2003 last month after a litany of economic sanctions were lifted against Iran, paving the way for the Gulf nation to ramp up its exports in the coming months.
On Wednesday morning, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that U.S. commercial crude oil inventories for the week ending on January 29, increased by 7.8 million barrels from the previous week. At 502.7 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Analysts expected a more modest build of 4.8 million on the week.
Total motor gasoline inventories also increased by 5.9 million barrels last week, extending sharp gains from the previous three weeks when gasoline stockpiles surged by nearly 25 million barrels.
Many analysts attribute the spike to seasonal increases by refineries, which typically build up its inventories in the winter months to prepare for the summer driving season. In 2015, during a six-week period ending on February 27, U.S. crude inventories soared by nearly 10%.
Meanwhile, U.S. production fell slightly for the second consecutive week but remained above 9.2 million barrels per day. It followed six straight weeks of output increases dating back to early December. The production slowdown provided upside pressure to crude, after it pared 2% gains from the overnight session.
At the same time, market-moving comments from Ecuador president Rafael Correa appeared to have a greater impact on Wednesday's price fluctuations. Speaking exclusively with the Wall Street Journal, Correa said an emergency OPEC meeting could be held as early as this month. A host of smaller OPEC members including: Venezuela, Nigeria and Ecuador have pressured Saudi Arabia to convene in order to craft a strategy to reduce a glut of supply on global markets. The Kingdom, though, has been reluctant to slash output unless the production cuts are also replicated by its top rivals such as Russia.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, plummeted by more than 1.3% on Wednesday to an intraday low of 97.42. The dollar has slumped approximately 2% since reaching a two-week high last Friday, after the Bank of Japan bolstered the greenback with a surprising decision to push interest rates into negative territory.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.