Forexpros – Crude oil futures extended losses on Wednesday, after government data showed U.S. crude and gasoline supplies rose significantly more-than-expected last week as traders continued to eye developments surrounding the euro zone’s ongoing debt crisis as well as tensions between Iran and the West.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD100.80 a barrel during U.S. morning trade, dropping 1.4%.
It earlier fell by as much as 1.55% to trade at a two-day low of USD100.58 a barrel.
Crude prices traded at USD101.25 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 rose by 5.0 million barrels in the week ended January 6, significantly higher than expectations for a 1.0 million barrel increase. U.S. crude supplies rose by 2.2 million barrels in the preceding week.
Total U.S. crude oil inventories stood at 334.6 million barrels as of last week, above the upper limit of the average range for this time of year.
Total motor gasoline inventories increased by 3.6 million barrels, compared to expectations for a 2.0 million barrel gain, after rising by 2.5 million barrels in the preceding week.
Crude prices came under additional pressure as concerns over the euro zone’s debt crisis lingered after ratings agency Fitch said that the European Central Bank should do more to avoid a ‘cataclysmic’ collapse of the single currency.
Markets were also jittery ahead of Thursday’s ECB policy meeting and government bond auctions by Spain and Italy on Thursday and Friday respectively.
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.
Crude prices were also affected by a broadly stronger U.S. dollar, which re-approached a 16-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 0.7% to trade at 81.72.
Meanwhile, oil traders continued to monitor tensions between Iran and the West after Iran’s Fars news agency reported that an Iranian nuclear scientist was killed in a bomb explosion in northern Tehran earlier in the day.
European Union’s efforts to block imports of Iranian oil appeared to be stalling. Greece, Italy and Spain are trying to soften a U.K. push for a blanket ban, amid concerns that a supply shock would add to the economic damage from the European debt crisis, according to EU diplomats.
Foreign ministers from the 27 European Union member states are scheduled to decide on sanctions on January 23 in Brussels.
Oil prices have been well-supported in recent sessions on fears that Iran may make good on threats to cut off access to the Strait of Hormuz, a narrow passageway that connects the oil-rich Persian Gulf nations with the rest of the world.
Iran is the world’s fourth largest oil producer, pumping nearly 5% of the world’s oil in 2010. The threat of a major supply disruption from the country has helped support oil prices in recent weeks.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery fell 0.75% to trade at USD112.42 a barrel, with the spread between the Brent and crude contracts standing at USD11.62 a barrel.
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