U.S. crude futures dip to new 6-yr low, as traders digest surprise build

Investing.com -- U.S. crude futures reversed territory late in Thursday's session amid a late sell-off, to fall to fresh six-year lows as investors continued to react to an unexpected inventory build one session earlier.

On the New York Mercantile Exchange, WTI crude for October delivery traded between $40.51 and $41.72 a barrel, before settling at $41.19, down 0.09 or 0.21% on the session. Texas Long Sweet futures were headed for just its ninth positive close over the last month, before dropping into negative territory in the final minutes of Thursday's session. Since July 20, U.S. crude futures are down by more than 20% from their level slightly above $50 a barrel.

On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $46.32 and $47.37 a barrel, before closing at $46.53, down 0.63 or 1.34% on the day. The spread between the international and U.S. benchmarks of crude stood at 5.34, below Wednesday's level of 5.87 at the close.

Energy traders continued to digest a surprising build in U.S. stockpiles last week, when crude inventories nationwide surged by 2.6 million barrels – its highest weekly increase in nearly four months. At 456.2 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.7 million barrels last week, and are in the middle of the average range, the EIA said in a report. At the Cushing Oil Hub in Oklahoma, the main delivery point for NYMEX crude oil, inventories increased by 300,000 barrels for the week.

U.S. crude stockpiles rose considerably for the week ending on August 14, in spite of continual declines in production. During the week, U.S. crude production fell by 47,000 barrels to 9.348 million barrels per day, around its lowest level since early-May. While output remains near its highest level in more than 40 years, it continues to wane amid declining U.S. shale production.

Analysts continue to flash warning signs for market observers, as crude prices remain near $40 a barrel, a key technical level for traders. The level is on the lower end of the "shale band," a gauge used to monitor crude production nationwide. When prices drop below $40 or outside the band, many shale producers are forced to cut output due to lower profit margins. Alternatively, when crude prices move above $60, it provides shale producers with more flexibility to drill at higher levels.

Energy traders await the release of Friday's weekly rig count from oil services firm Baker Hughes (NYSE:BHI) for further indications on the supply-demand balance in U.S. markets. Last week, the U.S. oil rig count increased by two to 672 for the week ending on August 7, marking the fourth straight week of weekly builds.

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The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.45% to an intraday low of 95.87 in spite of optimistic U.S. employment and manufacturing data. As a result, the index fell to its lowest level in more than a month.

Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.