Forexpros – Crude oil futures trimmed sharp losses on Wednesday, after a government report showed that U.S. crude supplies fell unexpectedly last week, while markets continued to eye development surrounding Italy’s debt crisis.
On the New York Mercantile Exchange, light sweet crude futures for delivery in December traded at USD96.14 a barrel during U.S. morning trade, falling 0.7%.
It earlier fell by as much as 2.2% to trade at USD94.57 a barrel, the lowest price since November 7.
Crude prices traded at USD95.10 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 1.4 million barrels in the week ended November 4, confounding expectations for a 0.5 million barrel increase.
U.S. crude supplies rose by 1.8 million barrels in the preceding week.
Total U.S. crude oil inventories stood at 338.1 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 2.1 million barrels, outstripping expectations for a 0.4 million barrel drop, after rising by 1.4 million barrels in the preceding week.
Meanwhile, concerns over Italy’s fiscal crisis intensified after the yield on Italian 10-year government bonds soared to a euro-lifetime high of 7.48% earlier, above the 7% level which prompted Greece, Ireland, and Portugal to seek international bailouts.
The move came after Italian Prime Minister Silvio Berlusconi announced late Tuesday that he would step down after parliament approves next year’s budget, but uncertainty remained over whether Italy’s new government will be able to shore up growth and implement austerity measures.
The news prompted investors to shun riskier assets, such as stocks and commodities, and flock to traditional safe haven assets like the U.S. dollar.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rallied 1.42% to trade at 77.88.
Oil prices typically strengthen when the U.S. currency weakens as the dollar-priced commodity becomes cheaper for holders of other currencies.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for December delivery dropped 1% to trade at USD113.84 a barrel, with the spread between the Brent and crude contracts standing at USD17.70 a barrel.
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