DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange accelerated losses in afternoon trade Wednesday as traders positioned ahead of the release of U.S. inventory data that is expected to show another weekly build in nationwide crude and gasoline stockpiles.

U.S. commercial crude oil inventories increased every week in 2023 so far, with stockpiles building by a massive 50.8 million barrels (bbl) or 12.1% during the first six weeks of the year. Estimates from analysts and traders show inventories likely rose by 2 million bbl last week, with expectations ranging from a decrease of 2 million bbl to an increase of 6.5 million bbl.

The closely watched survey from the American Petroleum Institute is scheduled for release at 4:30 p.m. EST, a day later than normal due to the Presidents Day holiday on Monday. U.S. Energy Information Administration will release its inventory report 11 a.m. EST on Thursday.

Gasoline stockpiles are expected to have increased by 400,000 bbl from the previous week, while stocks of distillates are seen to have declined by 700,000 bbl.

Refinery use likely decreased by 0.1% from the previous week to an 86.4% utilization rate.

Further pressuring the oil complex, the U.S. dollar leaped higher against global peers after minutes from the Federal Open Market Committee's Feb. 1 meeting revealed that participants saw continued tightness in the labor market that would contribute to upward inflation pressure.

Federal Reserve officials also noted that "inflation data received over the past three months showed a welcome reduction in the monthly pace of price increases but stressed that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was on a sustained downward path," the minutes said.

FOMC minutes further showed that "several participants advocated raising interest rates by 50 basis points" due to a "high level of uncertainty about inflation."

At least two Fed officials publicly voiced their support for a larger rate increase at the Fed's last meeting in February that concluded with a 25-basis hike in the federal funds rate.

"I saw a compelling economic case for keeping the pace at 50 (basis points) at that meeting," Cleveland Fed President Loretta Mester told reporters on Feb. 16.

Mester's comments were echoed by similar remarks from the St. Louis Fed President James Bullard who has advocated for the federal funds rate to be lifted to 5.375% as soon as possible.

Macroeconomic indicators for early February are seen falling in line with January data that showed resilient growth, strong consumer demand and higher inflation, suggesting the Fed's tighter monetary policy is having a limited impact.

"The Federal Reserve has been trying to put the brakes on, and it doesn't look like the brakes are getting much traction," said former U.S. Treasury Secretary Larry Summers.

U.S. Purchasing Manager's Index released Tuesday showed U.S. business activity rebounded further in February, reaching its highest level in eight months with a reading of 50.2.

That ended seven straight months of the index being below 50, which indicates contraction in the private sector. The services sector accounted for the rise in business activity, while manufacturing remained weak.

At settlement, the U.S. dollar index advanced to a nine-week high 104.523 settlement against a basket of foreign currencies, up more than 0.4% on the session, while further pressuring the front-month West Texas Intermediate contract. NYMEX April WTI futures declined $2.41 to $73.95 per bbl, with the international crude benchmark Brent slumping $2.45 for a $80.60-per-bbl close. NYMEX RBOB March fell 0.0780 cent to $2.3376 a gallon, and nearby-month NYMEX ULSD futures declined 0.0771 cent to $2.7148 a gallon.

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