NEW YORK (Reuters) - Crude oil futures slumped nearly 2 percent on Wednesday as weak economic data from Europe, China and the United States painted a somber outlook for global oil demand.
An unexpected heavy drawdown in U.S. crude stockpiles failed to staunch the day's decline spurred by weak demand in a German bond auction, which stirred concerns the euro zone debt crisis would worsen, and a sharp slowdown in China's factory activity.
The euro fell and the dollar rose on the near fiasco for the German bond sale, prompting investors to trim risky holdings in commodities such as oil and copper.
In London, ICE January Brent futures settled at $107.02 a barrel, down $2.01, or 1.84 percent, having fallen to a session low of $106.82. Brent crude has weakened for the fifth day out of six
U.S. January crude closed $1.84 lower, or 1.88 percent, at $96.17, after skidding to a session low of $95.35. U.S. crude has fallen for the fourth time in five sessions.
Brent's premium against U.S. crude slid slightly, to $10.85 at the close, from $11.02 on Tuesday.
Trading volumes were light, with U.S. dealings down 30 percent from the 30-day average, ahead of the Thanksgiving Day holiday on Thursday, according to Reuters data by 3:40 p.m. EST. Brent crude volume was off 24 percent from the 30-day average.
U.S. CRUDE DOWN, GASOLINE UP
U.S. crude inventories fell 6.22 million barrels last week, going against the forecast in a Reuters poll for a 500,000-barrel increase, while gasoline stocks rose much more than expected, by 4.5 million barrels, data from the U.S. Energy Information (EIA) showed.
"The large crude oil drawdown and low level of imports gives the report a supportive tone, but the gasoline inventory build and the continuing trend of lackluster demand trumps the crude data," said John Kilduff, a partner at Again Capital LLC in New York.
The euro slumped to a six-week low against the U.S. dollar after Germany suffered one of its worst debt auctions since the single currency was launched.
Other data showed the euro zone's private sector contracted for a third month. Furthermore, Fitch, the ratings agency, put France's AAA rating at risk. .DXY
Oil is priced in dollars and tends to weaken when the currency strengthens becoming less affordable to holders of other currencies, prompting investor risk aversion.
In China, the No. 2 oil consumer, its once-booming factories shrank at the fastest pace in 32 months on signs of domestic weakness.
U.S. economic data showed U.S. consumer spending growth slowed in October and business capital investments weakened, while initial claims for jobless benefits rose slightly.
The wobbly oil markets have caused J.P. Morgan Chase & Co (JPM.N) to lower its Brent and U.S. crude price forecasts for next year. It downgraded commodities to "underweight" due in part to economic uncertainty in Europe and the United States and signs of weaker growth in China.
The bank forecast that U.S. crude, also known as West Texas Intermediate, would fall to $107 per barrel, from its previous forecast of $110; while it saw Brent dipping to $112, from $115.