U.S. crude oil futures ended sharply lower Wednesday, the lowest since early October 2011, mostly on demand growth concerns after an Energy Information Administration report showed U.S. crude oil stockpiles to have increased more than expected last week. Investors also weighed the Federal Reserve move to leave its interest rate unchanged and extend the Operation Twist bond swapping program citing a slowdown in jobs.
Crude oil and gasoline inventories in the U.S. moved up during the week ended June 15, according to the Energy Information Administration Wednesday. The EIA report showed U.S. commercial crude oil inventories increased by 2.90 million barrels to 387.30 million barrels last week, and above the upper limit of the average range for this time of year. Analysts expected crude oil inventories to decline by 600,000 barrels last week.
Total motor gasoline inventories moved up by 0.9 million barrels last week, after decreasing by 1.70 million barrels in the prior week, but in the lower limit of the average range.
Light Sweet Crude Oil futures for July delivery dropped $2.23 or 2.7 percent to close at $81.80 a barrel on the New York Mercantile Exchange Wednesday.
Crude prices scaled a high of $84.34 a barrel intraday and a low of $80.91.
Crude oil ended higher yesterday as hopes for central bank stimulus resurfaced after Spanish and Italian bond yields surged to record high in the previous session.
Faced with a fragile economic recovery that may be losing steam, the Federal Reserve on Wednesday extended its Operation Twist bond swapping program. In an effort to thaw credit markets and keep real interest rates low, the Fed will continue to sell billions in short-term bonds and use the funds to buy longer-term securities investments through 2012.
The central bank kept its benchmark interest rate at effectively zero, and reiterated that economic slack will probably warrant "exceptionally low" interest rates through at least late 2014.
The dollar index, which tracks the U.S. unit against six major currencies, was trading at 81.419 on Wednesday, up from 81.365 in North American trade late Tuesday. The dollar scaled a high of 81.74 intraday and a low of 81.22.
The euro pared early losses to trade higher on comments attributed to German Chancellor Angela Merkel, where she is purported to have said the European Financial Stability Facility may be used to buy eurozone sovereign bonds on the secondary markets.
The euro traded higher against the dollar at $1.2708 on Wednesday, as compared to $1.2686 late Tuesday. The euro scaled a high of $1.2743 intraday and a low of 1.2638.
In economic news from the eurozone, Germany's producer price inflation slowed more than expected to 2.1 percent in May, Destatis said. Economists expected the inflation to ease to 2.2 percent from 2.4 percent in April.
From the U.K., policymakers of the Bank of England decided to retain the size of quantitative easing unchanged in a split vote, minutes of the meeting showed. Four members of the Monetary Policy Committee sought more stimulus, while five members voted to maintain the QE intact at GBP 325 billion.
by RTT Staff Writer
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