LONDON (AFP) - Oil slid Thursday, erasing earlier gains in thin pre-holiday trade, as traders tracked the strong dollar and awaited fresh inventories data in top consumer the United States.
New York’s main contract light sweet crude for February delivery, known as West Texas Intermediate (WTI), fell 64 cents to $98.72 a barrel.
Brent North Sea crude for February dipped 64 cents to $106.92 in late afternoon London trade. The European single currency slumped on Thursday to the lowest dollar level in more than one year, as Italy’s latest bond auction reignited fears over the eurozone crisis in volatile low-volume deals.
Just after midday, the euro tumbled to $1.2858 — the lowest level since September 14, 2010. The unit also sank against the safe-haven Japanese yen, striking 100.06 yen — which was last seen in June 2001.
Traders keep a keen eye on the strong greenback, which makes dollar-priced crude more expensive for buyers using weaker currencies, like the euro. This tends to dampen oil demand and prices.
VTB Capital analyst Andrey Kryuchenkov said that the oil market was “still trading off the broader market and against the dollar.”
He added that crude futures were “under pressure from a softer dollar in thin pre-holiday trading also after a disappointing auction for Italy’s long term debt”.
Crude futures had risen in earlier deals on Thursday as worries over crude producer Iran were offset by concerns over the impact of the eurozone debt crisis in the wake of Italy’s latest debt auction.
The US Department of Energy meanwhile is set to publish its latest inventories data for the week ending December 23. The weekly report was due one day later than normal owing to the Christmas holidays.
The United States is the world’s largest oil consumer and a gain in its inventories would imply a slowdown in its energy consumption, which would drive oil prices down.
Prices were meanwhile tempered by Wednesday’s weekly report from the American Petroleum Institute (API), which showed a spike in US stockpiles instead of an expected drawdown, analysts said.
API statistics showed a 9.6 million barrel gain in US stockpiles last week while analysts had predicted a 1.9-2.3 million barrel fall.
The row between Iran and the US continued Thursday as Washington warned Tehran not to close the Strait of Hormuz — the world’s most important oil transit channel — after Tehran’s Iran’s navy chief said it would be “really easy” to do so.
The strait is a strategic choke point linking the Gulf’s petroleum-exporting states to the Indian Ocean.