Oil drops to 3-week lows as US crude stocks show a bigger build

Oil prices on both sides of the Atlantic extends losses for the third straight session on Wednesday, mainly driven by bearish API inventory report released a day before.

Oil eyes EIA data

Currently, both crude benchmarks drop 1%, with Brent around $ 50.30, while WTI trades below $ 49.50 levels. Oil prices is on a declining trend so far this week, and now reaches fresh three-week lows as supply glut concerns return to markets, after the latest API crude inventory report showed a bigger-than expected rise in the US crude reserves.

The weekly API report revealed that the US crude stockpiles rose 4.8 million barrels against an expected rise of 1.7 million.

Moreover, the ongoing broad based US dollar strength also continues to have significant negative impact on the black gold. The USD index hit a new eight-month high of 99.09 on Tuesday on the back of renewed expectations of a Fed rate hike by the end of this year.  

A stronger USD makes dollar denominated commodity expensive for the holders in foreign currencies and vice-versa.

Meanwhile, uncertainty surrounding OPEC’s oil out cut/ freeze talks also collaborate to the downbeat tone in oil prices.

Next in focus remains the official Energy Information Administration (EIA) crude inventory report, which will be published later in the American session.