Forexpros – Crude oil futures were down for the first time in seven sessions on Wednesday, easing off a three-week high after a successful Italian bond auction failed to ease concerns over the debt crisis in the euro zone and as fears over a disruption to Iranian oil supplies receded.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD100.73 a barrel during early U.S. morning trade, slumping 0.6%.
It earlier fell by as much as 0.71% to trade at a session low of USD100.61 a barrel.
With most investors already away on year-end leave, trading volumes were thin, resulting in tight liquidity conditions and irregular volatility.
Italy’s Treasury sold EUR9 billion of six-month bills, at an average yield of 3.25%, down from a record-high 6.50% in a previous auction in November. The country also sold EUR1.73 billion of two-year zero-coupons at a 5% yield.
Following the auction, the yield on Italy’s 10-year bonds traded at 6.86%, hovering below the 7% threshold widely seen as unsustainable in the long-term.
Despite the upbeat results, Thursday’s sale of EUR8.5 billion of long-term Italian debt maturing between 2014 and 2022 was seen as a bigger test of market confidence in the country’s sovereign debt.
Adding to concerns, data released earlier showed that the use of the European Central Bank’s overnight deposit facility reached a new, all-time high of EUR452.03 billion on Tuesday.
The figure topped the previous record of EUR411.8 billion set on Tuesday. Heavy use of the deposit facility is seen as a sign of stress in the banking system, reflecting reluctance by banks to lend to each other.
The report added to speculation that the central bank’s three-year loan operation last week did little to strengthen the region’s banking sector.
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, a senior Saudi oil official said earlier that Gulf Arab nations are prepared to offset any potential loss of Iranian oil in the world market, easing concerns over a possible disruption to global oil supplies.
Iran’s first vice-president warned on Tuesday 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.
The comments came after the Islamic Republic launched a ten-day naval exercise in the Strait of Hormuz on Saturday.
Oil prices rose to USD101.75 a barrel on Tuesday, the highest since December 7 after advancing for the past six sessions, the longest streak of gains since November 2010.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery declined 0.75% to trade at USD108.44 a barrel, with the spread between the Brent and crude contracts standing at USD7.71 a barrel.
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