Forexpros – Crude oil futures extended sharp losses on Wednesday, trading at the lowest level in nearly three-weeks after a report showed that U.S. crude supplies fell slightly less-than-expected last week and after OPEC agreed on an output limit.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD96.16 a barrel during U.S. morning trade, plunging 3.98%.
It earlier fell by as much as 4.1% to trade at USD96.05 a barrel, the lowest since November 25.
Crude prices traded at USD97.16 prior to the release of the Energy Information Administration data.
The U.S. EIA said in its weekly report that U.S. crude oil inventories fell by 1.9 million barrels in the week ended December 9, falling short of expectations for a 2.0 million barrel decline.
Total U.S. crude oil inventories stood at 334.2 million barrels as of last week, remaining in the upper limit of the average range for this time of year.
Total motor gasoline inventories increased by 3.8 million barrels, significantly higher than expectations for a 1.0 million barrel increase, after rising by 5.1 million barrels in the preceding week.
Oil prices came under selling pressure before the EIA data, as the U.S. dollar rallied to an 11-month high against the euro, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.35% to trade at 81.25, the highest since January 11.
Dollar-denominated oil futures contracts tend to fall when the dollar strnghens, as this makes oil more expensive for buyers in other currencies.
Concerns over the euro zone’s debt crisis intensified after Italy’s Treasury sold the full targeted amount of EUR3 billion of five-year government bonds, but saw yields rise to a euro-era highs.
Euro zone developments have dominated trading in the oil market for the last several months, amid worries that the sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.
Meanwhile, OPEC, which supplies nearly 33% of the world’s oil supplies, agreed to a production ceiling of 30 million barrels a day, the first change since December 2008.
While the new agreement set an overall cap on OPEC oil production, the organization did not set production limits on individual counties.
“We have an agreement to maintain the market in balance and we’re going to adjust the level of production of each country to open space for Libyan production,” Venezuelan Energy Minister Rafael Ramirez said after today’s meeting ended.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery tumbled 3.1% to trade at USD105.70 a barrel, with the spread between the Brent and crude contracts standing at USD9.54 a barrel.
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