Forexpros – Crude oil futures held on to losses on Wednesday, trading near a five-week low after government data showed that U.S. crude supplies rose more-than-expected last week, while a broadly stronger U.S. dollar also weighed.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at USD98.44 a barrel during U.S. morning trade, shedding 0.5%.
It earlier fell by as much as 1.6% to trade at USD97.62 a barrel, the lowest since January 23, when prices fell to a five-week low of USD97.43 a barrel.
Crude prices traded at USD97.80 prior to the release of the Energy Information Administration data.
The U.S. EIA said in its weekly report that U.S. crude oil inventories fell by 3.6 million barrels in the week ended January 20, above expectations for a modest 0.9 million barrel increase. U.S. crude supplies fell by 3.4 million barrels in the preceding week.
Total U.S. crude oil inventories stood at 334.8 million barrels as of last week, remaining in the upper limit of the average range for this time of year.
Total motor gasoline inventories decreased by 0.4 million barrels, confounding expectations for a 2.2 million barrel gain, after rising by 3.7 million barrels in the preceding week.
Crude prices were already under pressure as the U.S. dollar strengthened ahead of the Federal Reserve’s rate statement later in the day, while ongoing concerns over the euro zone’s sovereign debt crisis also weighed.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.5% to trade at 80.40.
Demand for the greenback was boosted as debt-strapped Greece was clinging to hope of a last minute bond swap deal to avoid a default after euro zone officials rejected a final offer from the country’s private bondholders.
Meanwhile, reports surfaced earlier that the European Central Bank was said to oppose restructuring its Greek bonds, adding to concern the nation will fail to win a deal to reduce its debt.
Further adding to the negative sentiment, the cost of insuring Portuguese government debt against default rose to a euro-lifetime high earlier, amid renewed fears the country may need a second international bailout.
Oil traders were looking forward to the Federal Reserve’s policy-setting meeting later in the day for indications on how Fed officials see Europe’s debt problems impacting the U.S. economy, as well as the need for further stimulus measures.
The Fed was also expected to provide, for the first time in the central bank’s history, interest rate forecasts to markets, as well as its quarterly economic projections, timed to coincide with a news conference by Fed Chairman Ben Bernanke.
Prices continued to draw support from ongoing tensions between Iran and the West after the Islamic Republic again threatened to block shipments of crude through the Strait of Hormuz.
In his State of the Union address Tuesday, U.S. President Barack Obama warned Iran the U.S. would keep up pressure over its disputed nuclear program.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for March delivery slumped 0.33% to trade at USD109.67 a barrel, with the spread between the Brent and crude contracts standing at USD11.23 a barrel.
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