Crude Oil Retreats after API Data Shows Unexpected Inventory Build

Crude oil prices are trading lower as traders reacted to an unexpected increase in U.S. crude stocks according to data from the American Petroleum Institute. Traders reacted as if the news confirms the supply glut is still around.

International benchmark Brent Crude fell 48 cents to $49.48, up from an intraday low of $49.07. October West Texas Intermediate Crude was down as much as 78 cents, or 1.6 percent at $47.32 a barrel. Earlier in the session, the futures contract traded as low as $47.13.

According to the API, U.S. crude inventories rose by 4.5 million barrels in the week-ending August 19. Analysts were looking for a 455,000-barrel decline.

The huge crude oil build turned the market into sellers rather quickly, indicating a rapid shift in trader sentiment after strong day on Tuesday.

Today, investors will also get the opportunity to react to the latest weekly crude stocks data from the U.S. Energy Information Administration. It is expected to show a 0.5 million barrel draw down. However, investors are a little skeptical about the accuracy of this forecast, given the API data.

Gasoline inventories decreased by 2.2 million barrels – and if confirmed by today’s EIA figures, this would be the fourth weekly draw for the oil product in a row. Distillates also experienced an 834,000 barrel draw.

In other markets, U.S. stock index futures are expected to open flat on Wednesday, as investors react to the wild swings in the crude oil market, key economic data and ahead of a key speech by the Federal Reserve’s Chair.

U.S. investors will get the opportunity to react to the latest earnings news from HP, Guess and the Royal Bank of Canada. Also on tap is home price data from FHFA and Existing Home Sales due out at 1300 GMT and 1400 GMT respectively.

Earlier today, the Mortgage Bankers Association reported that weekly mortgage applications dropped 2.1% as interest rates edged higher. Applications to refinance a home loan fell for the week, down 3 percent, but volume was nearly 45 percent higher than the same week one year ago, when interest rates were higher.

European stocks were mostly higher on Wednesday. However, most traders felt the markets lacked direction at times as investors wait for clues from Fed Chair Janet Yellen regarding the direction of short-term interest rates.