Forexpros – Crude oil futures held on to sharp losses during U.S. morning trade on Wednesday, after a U.S. government report showed oil supplies rose unexpectedly last week, while investors looked ahead to the conclusion of the Federal Reserve’s policy meeting.
The July contract is due to expire at the end of Wednesday’s trading session. Contract expiration often leads to volatile sessions as market participants look to close out positions or reposition their portfolios.
Meanwhile, the more actively traded contract for August delivery declined 1.35% to trade at USD83.22 a barrel. It earlier fell by as much as 1.9% to trade at a session low of USD82.83 a barrel.
The August crude contract traded at USD83.24 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 rose by 2.9 million barrels in the week ended June 15, defying expectations for a 1.1 million barrel decline. U.S. crude supplies fell by 0.2 million barrels in the preceding week.
Total U.S. crude oil inventories stood at 387.3 million barrels as of last week, just below the highest level since 1990.
Total motor gasoline inventories increased by 0.9 million barrels, above expectations for a gain of 0.8 million barrels, after falling by 1.7 million barrels in the preceding week.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Meanwhile, market participants were looking ahead to the outcome of the Federal Reserve’s policy setting meeting later in the day, amid growing hopes policy makers will announce measures to stimulate the world’s largest economy.
A growing number of Fed watchers expect the central bank to extend its Operation Twist program over the more extreme option of full-blown quantitative easing. The current USD400 billion Twist program is set to expire at the end of June.
The Fed’s Open Market Committee will release a policy statement at the end of the meeting. The announcement was to be followed by a press conference with Fed Chairman Ben Bernanke to discuss the monetary policy decision.
Market players continued to monitor political developments in Greece. Evangelos Venizelos, the head of the Pasok party, announced earlier that a coalition government had been formed, which will allow Athens to resume negotiations with creditors on its international bailout deal.
Following the announcement, the leader of the conservative New Democracy Antonis Samaras was sworn in as the new Greek prime minister.
Meanwhile, the yield on Spanish 10-year bonds pulled back to 6.75%, after climbing to euro-era highs earlier in the week, amid fears that Madrid will be forced to seek a full-fledged international bailout.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery fell 0.8% to trade at 95.00 a barrel, with the spread between the Brent and crude contracts standing at USD11.78.
Earlier in the day, prices fell to as low as USD94.69 a barrel, just above the previous session’s low of USD94.50, which was the lowest since January 10, 2011.
London-traded Brent prices are down nearly 25.5% since hitting an intraday high of USD128.38 on March 1.