Oil Falls on US Supply Build

Oil Falls on US Supply BuildOil Falls on US Supply Build

Oil fell on Wednesday on fresh evidence of growing global oversupply and as investors awaited the outcome of a US Federal Reserve meeting where interest rates are likely to be raised, boosting the dollar and pressuring commodities.

Analysts are watching for any test of Brent's December 2008 low of $36.20, with a break below that level taking the benchmark to levels not seen since 2004.

Brent was down 88 cents at $37.57. On Tuesday, the contract closed up 53 cents at $38.45 a barrel in its first gain in eight days, CNBC reported.

West Texas Intermediate crude futures were down 62 cents at $36.71 per barrel after rising more than $1 on Tuesday. It was supported by looming changes to legislation that are expected to enable US crude oil exports.

The overwhelmingly bearish sentiment that has pushed Brent from above $115 per barrel last June returned to the fore, as fresh evidence emerged that low prices are doing nothing to ease heavy oversupply.

Data on Tuesday from industry group the American Petroleum Institute showed a surprise rise of 2.3 million barrels in US crude stockpiles last week. A Reuters poll of analysts had forecast a fall of 1.4 million barrels.

Inventory data from the US Energy Information Administration is due on Wednesday. Investors are also positioned for a rise in interest rates that would support the dollar. This makes oil, which is priced in dollars, more expensive to holders of other currencies.

"The market sentiment is that this will lead to a higher dollar and push commodity prices lower," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

"Global producers, including Russia and OPEC countries, might have to cut prices to compete with US shale producers who could have room to raise prices," said Jasper Lawler, analyst at CMC Markets.

"The extra competition for market share from US shale can only add to the pressure on OPEC."