Forexpros – Crude oil futures dropped in thin year-end trade on Thursday, falling below USD99-a-barrel after government data showed U.S. crude supplies rose unexpectedly last week.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD98.47 a barrel during U.S. morning trade, dropping 0.9%.
It earlier fell by as much as 1.05% to trade at USD98.31 a barrel, the lowest since December 21.
Crude prices traded at USD98.82 prior to the release of the Energy Information Administration data.
Trading volumes were thin in many markets ahead of the New Year’s holiday weekend, resulting in volatile movements.
The U.S. EIA said in its weekly report that U.S. crude oil inventories rose by 3.9 million barrels in the week ended December 23, confounding expectations for a 2.5 million barrel decline.
Total U.S. crude oil inventories stood at 327.5 million barrels as of last week, remaining in the upper limit of the average range for this time of year.
Total motor gasoline inventories decreased by 0.7 million barrels, beating expectations for a 0.7 million barrel increase, after declining by 0.4 million barrels in the preceding week.
Crude prices came under additional pressure as concerns over the euro zone’s debt crisis lingered after Italy’s Treasury sold EUR7 billion of long-term debt maturing between 2014 and 2022, below the maximum target of EUR8.5 billion.
The country sold EUR2.5 billion of 10-year bonds, maturing in March 2022, at an average yield of 6.97%, down from November’s euro-record high 7.56%. The country also auctioned EUR2.5 billion of three-year bonds, at an average yield of 5.62%.
Following the auction, the yield on Italy’s 10-year bonds rose to 7.12%, above the critical 7% threshold widely seen as unsustainable in the long-term. Yield’s last traded at 7.01% after the European Central Bank purchased Italian bonds in the secondary market.
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.
Oil prices dropped nearly 2% on Wednesday, the biggest decline in nearly two weeks as a broadly stronger U.S. dollar and receding fears over a disruption to Iranian oil supplies weighed on prices.
A senior Saudi oil official said Wednesday that Gulf Arab nations are prepared to offset any potential loss of Iranian oil in the world market.
The comments came after Iran’s first vice-president warned that the flow of oil through the Strait of Hormuz would be stopped if foreign sanctions were imposed on Iran’s crude exports over its nuclear ambitions.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery fell 0.85% to trade at USD106.64 a barrel, with the spread between the Brent and crude contracts standing at USD8.17 a barrel.
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