WTI oil futures retreat ahead of U.S. weekly supply report

Investing.com - West Texas Intermediate oil futures declined on Wednesday, amid speculation weekly supply data due later in the session will show U.S. crude inventories rose at a faster pace than expected last week.

Market players also awaited the release of key U.S. economic data while looking ahead to the outcome of the Federal Reserve's policy meeting later in the day.

On the New York Mercantile Exchange, crude oil for June delivery fell 42 cents, or 0.73%, to trade at $56.64 a barrel during European morning hours. A day earlier, Nymex oil prices inched up 7 cents, or 0.12%, to settle at $57.06.

Wednesday's government report was expected to show that U.S. crude oil stockpiles rose by 2.3 million barrels last week, while gasoline stockpiles were forecast to increase by 0.3 million barrels.

After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories rose by 4.2 million barrels in the week ended April 24, above expectations for a gain of 1.4 million.

The report also showed that gasoline stockpiles increased by 408,000 barrels, while distillate stocks gained 746,000 barrels.

Total U.S. crude oil inventories stood at 489.0 million barrels as of April 17, the most in at least 80 years, even as drilling activity fell.

U.S. oil futures have risen almost 15% in April due to mounting expectations that U.S. shale oil production has peaked and may start falling in the coming months amid an ongoing collapse in rigs drilling for oil.

According to industry research group Baker Hughes (NYSE:BHI), the number of rigs drilling for oil in the U.S. fell by 31 last week to 703, the lowest since October 2010. It was the 20th straight week of declines.

Market players have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for June delivery slumped 41 cents, or 0.65%, to trade at $64.21 a barrel. On Tuesday, London-traded Brent futures declined 19 cents, or 0.29%, to close at $64.64.

Brent futures are up more than 15% so far in April as some investors bet that a bottom had been reached after a nine-month long rout. But prices are still down approximately 43% since June, when futures climbed near $116.

Meanwhile, the spread between the Brent and the WTI crude contracts stood at $7.57 a barrel, compared to $7.58 by close of trade on Tuesday.

Investors were also looking ahead to preliminary data on first quarter U.S. economic growth and a report on pending home sales later in the day for further indications on the strength of the recovery, ahead of the Federal Reserve's policy announcement.

A recent run of disappointing U.S. economic data dampened optimism over the recovery, fuelling speculation the Fed could delay hiking interest rates until late 2015, instead of tightening midyear.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.15% to trade at 96.03 early on Wednesday, the weakest level since March 18.