FRX: Crude oil extends losses after U.S. supply data, futures tumble 3%
Forexpros - Crude oil futures were down sharply during U.S. morning hours on Wednesday, adding to heavy losses after a U.S. government report showed both oil and gasoline supplies increased last week.
Prices were already lower ahead of the data as investor focus turned from U.S. President Barack Obama’s re-election to concerns over U.S. fiscal policy, while uncertainty over a Greek parliamentary vote also weighed on sentiment.
On the New York Mercantile Exchange, light sweet crude futures for delivery in December traded at USD85.43 a barrel during U.S. morning trade, plunging 3.7%.
New York-traded oil prices fell by as much as 3.85% earlier in the day to hit a session low of USD85.34 a barrel.
Prices traded at USD86.19 a barrel prior to the release of the EIA data.
The U.S. EIA said in its weekly report that U.S. crude oil inventories rose by 1.8 million barrels in the week ended November 2, broadly in line with market expectations.
Total U.S. crude oil inventories stood at 374.8 million barrels as of last week, the highest level for this time of year in at least 30 years.
Total motor gasoline inventories increased by 2.9 million barrels, confounding expectations for a decline of 1.0 million barrels.
Oil prices were lower ahead of the U.S. supply data as investor attention turned to the U.S. “fiscal cliff”, USD600 billion of automatic tax hikes and spending cuts due to come into effect on January 1 unless lawmakers can reach an agreement, clouding the outlook for U.S. and global growth.
Market sentiment found support overnight after President Obama was declared as winner of the U.S. presidential election.
Obama won 303 electoral votes, more than the 270 needed to secure a second term in the White House, while Republican challenger Mitt Romney won 206 electoral votes.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Meanwhile, comments from European Central Bank President Mario Draghi also weighed. Draghi said earlier that the euro zone’s ongoing debt crisis is beginning to have an impact on Germany, the region's largest economy.
Data released earlier in the day showed that German industrial production dropped 1.8% in September, compared to expectations for a 0.5% decline.
The European Commission cut its growth forecast for the euro area earlier. The 17-nation euro economy will grow by a meager 0.1% in 2013, down from a May estimate of 1%. It cut the forecast for Germany to 0.8% from 1.7%.
Markets now turned their attention to Greece, where country’s parliament prepared to vote on the latest rounds of austerity measures later in the day, which could determine if the debt-strapped country receives its next tranche of financial aid.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for December delivery tumbled 2.45% to trade at USD108.34 a barrel, with the spread between the Brent and crude contracts standing at USD22.91 a barrel.
