Investing.com - Crude prices dropped in Asia on Wednesday after an industry report on U.S. crude and refined product stockpiles showed sharp builds.
On the New York Mercantile Exchange, WTI crude for July delivery dropped 1.44% to $47.79 a barrel. On the Intercontinental Exchange (ICE), Brent crude fell 1.42% to $49.12 a barrel.
The American Petroleum Institute said crude stocks gained by 1.518 million barrels last week, well above the 1.4 million barrels fall seen while distillates stocks rose 3.725 million barrels, well more than the drop of 750,000 expected, and gasoline stock gained 2.254 million barrels, considerably higher than the drop of 1.25 million barrels seen.
Separately, the U.S. Energy Information Administration (EIA) is expected to report a draw on Wednesday of 2.3 million barrels for the week ending on June 10. Earlier, the Paris-based International Energy Association increased its forecasts for global demand growth in 2016 slightly by 0.1 to 1.3 million barrels per day.
Currently, analysts estimate that global supply is outpacing demand by more than 1 million bpd.
Overnight, crude futures pared sharp losses on Tuesday as rising Brexit fears continued to spook global energy markets.
Energy traders continued to closely monitor poll results in the U.K., which increasingly show a British public shifting their support to the "Leave," campaign, ahead of next week's controversial Brexit referendum. An online poll from TNS said a Leave vote widened its lead over a vote to "Stay" by a 47-40 margin, as Rupert Murdoch's Sun newspaper backed a campaign to depart from the European Union. Another survey, a YouGov poll for The Times, found that the "Leave" vote held a 46-39% lead, while 11% remained undecided.
Consequently, volatility in the pound sterling hit its highest level in two decades on Tuesday, providing significant downward pressure on oil. A "Leave" vote has sparked fears of contagion throughout the euro zone, which could trigger a recession and slow demand for crude throughout the continent.
A number of major oil companies have also issued stark warnings of the ramifications that could ensue from a U.K. departure from the EU. A "Leave" vote could result in the potential loss of free travel arrangements by UK workers employed by euro area oil companies, while increasing trade barriers between the UK and major nations in the EU.
As a result, a host of UK oil workers could require non-EU citizenship to work abroad, a development which could increase operating costs for top energy companies. It appears to be one factor on why Shell (LON:LON:RDSa) CEO Ben Van Bearden views a potential Brexit as having a negative impact on his company's bottom line.
Market players also traded cautiously ahead of the Federal Reserve's latest interest rate decision on Wednesday afternoon. While the Federal Open Market Committee (FOMC) is widely expected to leave its benchmark interest rate unchanged, Fed chair Janet Yellen could provide key clues on whether the U.S. central bank will raise rates before the end of the fall.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.