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Crude Oil Ends Below $86 On Demand Growth Concerns

U.S. crude oil settled below $86 a barrel Thursday, erasing gains made yesterday, on continued demand growth concerns despite some upbeat macroeconomic data out of the world's largest economy. The Energy Information Administration's weekly oil report yesterday also had an impact on crude pries which showed inventories to have increased more-than-expected. Investor concerns over the U.S. debt negotiations persisted with the fiscal cliff looming ahead that would induce automatic tax hikes and spending cuts beginning January.

Light Sweet Crude Oil futures for January delivery shed $0.88 or 1.0 percent to close at $85.89 a barrel on the New York Mercantile Exchange Thursday.

Crude prices scaled a high of $86.97 a barrel intraday and a low of $85.81.

Yesterday, oil ended higher after the Fed announced that it will replace its "Operation Twist" program, which expires at the end of the year, with the purchase of longer-term Treasury securities at a pace of $45 billion per month.

The Energy Information Administration yesterday indicated U.S. crude oil inventories to have moved up 0.80 million barrels and gasoline stocks up 5.00 million barrels in the week ended December 7. Analysts expected crude oil inventories to dip by 2.50 million barrels last week.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 79.95 on Thursday, up from 79.89 in North American trade late Wednesday. The dollar scaled a high of 80.04 intraday and a low of 79.79.

The euro traded higher against the dollar at $1.3077 on Thursday, as compared to $1.3074 late Wednesday in North America. The euro scaled a high of $1.3100 intraday and a low of $1.3042.

In economic news from the U.S., first-time claims for unemployment benefits unexpectedly showed a decline in the week ended December 8. The Labor Department said initial jobless claims dropped to 343,000, a decrease of 29,000 from the previous week's revised figure of 372,000. Economists expected jobless claims to come in unchanged compared to the 370,000 originally reported for the previous week.

Meanwhile, a report from the U.S. Commerce Department showed retail sales to have increased by 0.3 percent in November following a 0.3 percent decrease in October. Economists expected retail sales to increase by about 0.6 percent. Excluding an increase in sales by motor vehicle and part dealers, retail sales were unchanged for the second consecutive month, in line with estimates.

Business inventories in the U.S. increased in line with economist estimates in the month of October, a Commerce Department release showed Thursday. Business inventories rose by 0.4 percent in October following a 0.7 percent increase in September. Nonetheless, business sales fell by 0.4 percent in October after surging 1.2 percent in the previous month.

A U.S. Labor Department release on Thursday showed producer prices for November declined by 0.8 percent following a 0.2 percent drop in October. Economists anticipated prices to dip by about 0.5 percent. The bigger than expected decrease in producer prices was largely due to a sharp drop in energy prices, which tumbled 4.6 percent in November after falling by 0.5 percent in October.

Eurozone finance ministers finally approved the release of a second disbursement of bailout funds to Greece on the completion of the government's debt buyback operation. The group authorized the bailout fund, the European Financial Stability Facility (EFSF), to release the next installment for a total amount of 49.1 billion euros, in several tranches.

Greece will receive 34.3 billion euros in days to follow, with the remaining amount to be disbursed in the first quarter of 2013. The utilization would be about 16 billion euros for bank recapitalization, 7 billion euros for budget financing, and around 11 billion euros to finance debt buyback.

by RTT Staff Writer

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