Investing.com -- U.S. crude futures fell to fresh 3-month lows, ahead of the American Petroleum Institute's latest weekly inventory report on Tuesday evening, as a strong dollar and persistent concerns of global oversupply continued to weigh.
On the New York Mercantile Exchange, WTI crude for September delivery traded between $42.38 and $43.37 a barrel before closing at $42.83 down 0.25 or 0.58% on the session. At session-lows, the front month contract for U.S. crude fell to its lowest level since April 20. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $44.54 and $45.34, a barrel, before settling at $45.19, up 0.06 or 0.13% on the day.
Crude futures have tumbled roughly 18% since hitting 10-month highs in early-June.
Energy analysts continue to express widespread concerns related to the oversupply in crude and refined product, even as inventories retreat from near record-highs. Investors will receive further signals on Tuesday after the bell when the API releases its weekly crude stockpile report for the week ending on July 22. Separately, Wednesday's government report could show that crude stockpiles fell by 2.3 million barrels for the week, representing the 10th consecutive weekly decline in inventory levels nationwide. Nevertheless, the current stockpile total still remains above the five-year average by approximately 100 million barrels despite the recent drawdown.
Analysts also expect gasoline inventories to rise by 675,000 barrels and distillate fuel inventories to tick up by 700,000 on the week. Earlier this month, distillate fuel inventories, which include heating and diesel oil, spiked by 4.1 million barrels for the week ending on July 8, representing the largest weekly build in more than five months.
While consumers continue to spend at the pump at a steady rate, they haven't traveled enough over the key summer driving season to push gasoline inventories dramatically lower. In terms of output, crude production in the U.S. ticked up to 8.494 million barrels per day last week, as oil rigs nationwide continue to creep back online. Globally, supply levels remain high as Iraq and Libya ramp up exports in the coming weeks. As a result, analysts from Morgan Stanley (NYSE:MS) predict that oil could drop as low as $35 a barrel before the end of this year.
In February, U.S. crude futures touched down to a 13-year low at $26.05 a barrel. Although crude completed a determined recovery in the five months since, oil prices are still down substantially from their peak of $115 a barrel in June, 2014.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat on Tuesday hovering at 97.16 in U.S. afternoon trading. The index remains near four-month highs. Over the last few weeks, the dollar has risen sharply against the Japanese Yen and British Pound amid signs of potential easing from both the Bank of Japan and Bank of England.
Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.