Investing.com -- WTI crude futures declined sharply on Tuesday to fall under $50 a barrel for the first time since early-April, amid an expected build in U.S. crude stockpiles last week.
On the New York Mercantile Exchange, WTI crude for September delivery traded between $49.33 and $50.79 a barrel, before closing at 49.39, down 1.47 or 2.89% to 49.39. Crude futures closed lower for the fifth time in six sessions to drop under the key technical level of $50 a barrel for the first time since April 6.
On the Intercontinental Exchange (ICE), brent crude for September delivery wavered between $56.16 and $57.09 a barrel, before settling at 56.20, down 0.89 or 1.57% on the session. The spread between the international and U.S. benchmarks of crude stood at 6.81, above a level of 6.19 at Tuesday's close.
In its weekly Petroleum Status Report, the U.S. Energy Information Administration (EIA) said U.S. crude inventories rose by 2.5 million barrels for the week ending on July 17. While analysts expected a draw of 2.2 million barrels last week, traders may have priced in a significant build after the American Petroleum Institute said on Tuesday that U.S. crude stockpiles had declined by 2.1 million barrels for the week. Crude inventories nationwide are now at 463.9 million barrels the highest level at this time of year in at least 80 years. At the Cushing Oil Hub in Oklahoma, the main delivery point for NYMEX oil, its crude inventory increased by 813,000 last week, above expectations for a 300,000 build.
Even the slightest weekly build is viewed as bearish for crude, amid a glut of oversupply on global energy markets. Although U.S. crude inventories have declined steadily in recent weeks the trend is likely to level off, as the peak of the U.S. driving season nears an end. Gasoline production increased last week, as refineries operated at 95.5% of their operable capacity. Opec triggered an extended battle for global market share last November by keeping its production ceiling above 30 million barrels per day. While the world's largest oil cartel reportedly employed the strategy in an effort to undercut U.S. shale producers, U.S. crude output has remained near 40 year-highs over the last several months. Last week, U.S. production fell slightly by 4,000 barrels per day to 9.558 million bpd.
Elsewhere, U.S. House of Representatives speaker John Boehner (R, Ohio) insisted he will do "everything possible," to stop U.S. president Barack Obama's comprehensive nuclear deal with Iran, as Congress began its 60-day review of last week's agreement on Wednesday. Iran could double its export level to approximately 2 million bpd over the next year if severe economic sanctions are lifted by Western powers. The outflow of Iranian oil could depress prices in a market already saturated by oversupply.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.4% to an intraday high of 97.94. On Monday, the dollar index surged to a three-month high at 98.31.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.