Aug. 1 (UPI) -- Crude oil prices turned sharply lower ahead of the start of trading Wednesday in New York after a surprise build in crude oil inventories in the United States.
Oil prices were on the downward trajectory on Tuesday even though BP CEO Bob Dudley said he saw a series of supply-side issues that would be supportive in the short-term. Meanwhile, the U.S. economy is showing strength on the back of strong growth in gross domestic product in the second quarter, which would provide tailwinds for commodities on expectations of future demand.
After the market closed Tuesday, the American Petroleum Institute reported domestic crude oil inventories swelled by 5.6 million barrels last week, compared to a draw forecast by S&P Global Platts.
The build, if confirmed at 10:30 a.m. EDT by the U.S. Energy Information Administration, would ease concerns about supply shortages from some members of the Organization of Petroleum Exporting Countries. Those supply-side concerns lifted crude oil prices at times in July.
The price for Brent crude oil, the global benchmark for the price of oil, was down 1.75 percent as of 9:20 a.m. EDT to $72.91 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 1.51 percent to $67.72 per barrel.
Markets could move on any signals on Fed policy rates on Wednesday. The Fed could indicate support for gradual rate hikes as Chairman Jerome Powell told lawmakers last month that data indicate the U.S. economy is strong and inflation is moving within the target range of 2 percent.
Elsewhere, oil prices may be moving on growing concerns about U.S.-Chinese trade policies. International monetary leaders have indicated a full-blown trade war would have an overall negative impact on the global economy, raising the prices of many consumer goods.
On Wednesday, a spokesman for the Chinese Foreign Ministry said an expected announcement of even more trade pressure from the United States would be counterproductive.
According to the official Xinhua News Agency, spokesman Geng Shuang said "pressure and blackmail by the United States would not work."
Beijing, he added, would inevitably issue a tit-for-tat response to safeguard its interests.
"Worries about the potential risk to demand from a prolonged trade war, signs of lower Chinese demand, and a surprise rise in U.S. stocks of crude oil added fuel to the renewed negative sentiment," Ole Hansen, the head of commodity strategy at Danish investment firm Saxo Bank, said in a research note emailed to UPI.