Oil Lower in Early Trade

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and Brent futures on the Intercontinental Exchange traded lower early morning Wednesday following a Tuesday afternoon report from the American Petroleum Institute showing a larger-than-expected build in commercial crude stocks.

In midmorning trade, Nymex March West Texas Intermediate futures were down $0.43 at $53.23/barrel (bbl), with ICE April Brent fractionally lower at $61.85 bbl. Nymex March ULSD futures were down 0.99 cents at $1.8876 gallon, and March RBOB futures lost 0.94 cents to $1.4165 gallon.

Oil futures were pressured by the bearish supply data released late Tuesday by API, detailing a larger-than-expected inventory build in commercial crude supplies during the week ended Feb. 1.

Crude and gasoline supply were expected to have increased during the week ended Feb. 1, but API reported a steep jump of 2.51 million bbl in crude stocks, about 1.0 million bbl more than estimated. Gasoline stocks increased 1.731 million bbl said API while market consensus was about 1.3 million bbl. Distillate stocks rose 1.141 million bbl that contrasted with expectations for a 2.0 million bbl draw.

The Energy Information Administration will publish its weekly supply statistics for the week ended Feb.1 at 10:30 a.m. ET.

Oil traders continue to focus on the surging U.S. dollar, which advanced to a 1-1/2 week high in overnight index activity. A stronger U.S. economy relative to international economies has contributed to the dollar rally in recent days.

A strengthening U.S. dollar pressures domestic oil prices since oil overwhelmingly trades internationally in the greenback. However, a stronger dollar also pressures emerging markets, as it becomes more expensive in a local currency to purchase dollar-based commodities, potentially dampening demand.

The U.S. sanctions on Venezuela and supply cuts of 1.2 million barrels per day (bpd) by Organization of the Petroleum Exporting Countries and Russia have broadly supported oil prices, although these latest bullish developments in physical market has yet to result in sizable price gains.

Liubov Georges can be reached at liubov.georges@dtn.com