Brent crude fell towards $53 a barrel on Wednesday as US crude stocks were forecast to have surged for the tenth straight week to a new record high, fuelling supply concerns of a global oil glut, although a weaker dollar kept a floor under prices.
Brent for May delivery fell 25 cents to $53.26 a barrel by 0357 GMT after ending the previous session 7 cents up at $53.51.
US crude for April delivery fell 79 cents to $42.67 a barrel, falling more than $1 a barrel in early Asian trade on Wednesday after crude inventories rose by 10.5 million barrels to 450 million in the week to March 13, data from industry group the American Petroleum Institute had showed on Tuesday.
Analysts had expected a 3.8 million barrel increase.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 3 million barrels, API said.
Inventory data
Official inventory data will be issued later on Wednesday by the US Energy Information Administration (EIA).
“Whether the API data is right or wrong, it is still about market expectations or missed expectations,’’ said Ben LeBrun, market analyst at Sydney's OptionsXpress.
The market is now watching for the EIA data to confirm the build in crude stocks, he said.
“If it is better than expectations, they’ll be a short-term bounce in oil prices,’’ he said.
Expiry of contracts
The expiry of the Brent contract on Monday and the West Texas Intermediate forward contract on March 20 “is adding a bit of fuel, adding to volatility in the market’’, LeBrun said.
“I expect some technical support to kick in before oil retests (January’s) record lows,’’ he said.
Fed policy statement
Traders are also waiting for the US Federal Reserve’s policy making committee to outline its monetary policy objectives later on Wednesday which are expected to give a clearer intention on interest rates.
“If US interest rate hikes would be pushed back, this would likely cause the dollar to weaken, however, only in the short run,’’ said Singapore's Phillip Futures in a research note on Wednesday.
Weak dollar
A weaker dollar should support oil prices because it makes commodities denominated in the dollar cheaper for the holders of other currencies and expands their purchases of commodities and other assets.
Rising output from Libya and plans by Iran to boost oil production once Western sanctions are lifted have heightened the concerns of global oversupply concerns although Tehran’s moves to flood the market with oil have been played down by diplomats.