Forexpros – Crude oil futures erased gains on Thursday, dropping to a one-week low as the U.S. dollar strengthened after European Central Bank President Mario Draghi dampened hopes for increased purchases of euro zone bonds and ruled out the possibility of lending to the International Monetary Fund.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD99.77 a barrel during U.S. morning trade, dropping 0.78%.
It earlier fell by as much as 0.99% to trade at USD99.56 a barrel, the lowest since December 1.
Risk sentiment took a hit after ECB President Draghi said that the central bank’s bond-buying program was “neither eternal nor infinite” and deflected questions about more bond purchases by the ECB.
Speaking at the bank’s post policy meeting press conference, Draghi added that it was “legally complex” for euro zone central banks to lend to the International Monetary Fund, citing Article 123 of the Lisbon Treaty, which prevents it from giving monetary financing to governments.
“If the IMF were to use this money exclusively to buy bonds in the euro area, we think it’s not compatible with the treaty.”
The ECB did unveil new measures to increase liquidity, including unlimited 36-month credit to euro zone banks, a cut in the reserve requirement for commercial banks and the loosening of collateral requirements for ECB loans.
The announcement came after the ECB cut its benchmark interest rate by 0.25%, bringing rates to a record low 1%.
Oil traders also remained cautious ahead of a crucial two-day summit of European leaders due to begin later in the day in Brussels.
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.
The U.S. dollar climbed to a six-day 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 0.44% to trade at 78.82.
Draghi’s comments overshadowed a report showing that first time jobless claims in the U.S. fell by 23,000 to a nine-month low of 381,000. Analysts had expected jobless claims to decline by 8,000 to 396,000.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery slumped 0.55% to trade at USD108.92 a barrel, with the spread between the Brent and crude contracts standing at USD9.15 a barrel.
Forexpros
