According to an aticle published today on the Wall Street Journal,U.S. oil futures extended their losses Tuesday, dropping to fresh four-month lows as traders worried that a better-than-expected reading on the U.S. services industry would lead to a faster wind down of the Federal Reserve's economic stimulus program.
Light, sweet crude for December delivery fell as much as $1.17, or 1.2%, to $93.45 a barrel on the New York Mercantile Exchange, dropping to the lowest price since June 24. Nymex crude was recently off $1.13, or 1.2%, at $93.50.
Brent crude on ICE Futures Europe also declined 59 cents, or 0.6%, to $105.65 a barrel. The European benchmark, considered to be a gauge of world oil prices, was supported by reports of violence in Libya, which has struggled to get its crude production back up to prior levels amid labor unrest.
U.S. oil prices, already trading lower Tuesday on fears over high supplies and weak demand, followed the equity market even lower after the Institute for Supply Management's nonmanufacturing purchasing managers index for October rose to 55.4 from 54.4 in September. Forecasters had expected a slight decline.
Market participants believe the data could give the Fed a reason to accelerate the timetable for tapering its $85 billion-a-month bond buying program. The measure has weakened the dollar, making oil cheaper to buy using other currencies.
U.S. oil supplies have risen by 28.2 million barrels, or roughly 8%, in the past six weeks as refiners are processing less crude amid seasonal maintenance work and unplanned outages. Total oil stockpiles of 383.9 million barrels are at the highest level since late June and the highest amount since the Energy Information Administration began tracking the data in 1982.
Meanwhile, Brent crude declined less than the U.S. contract after militia engaged in heavy fighting in the Libyan capital of Tripoli on Tuesday. The violence, which included heavy gunfire and explosions lasting several hours, wounded at least one person, according to a Reuters report.
Libya, which pumped 1.4 million barrels of crude per day earlier this year, has been hurt by strikes at its oil export terminals, which nearly crippled its oil output in recent months. The disruptions have cut supplies to Europe and helped support Brent prices.
According to the AFP, Libyan production now stands at 250,000 barrels a day, a figure roughly 100,000 barrels below the level the country was expected to reach last week.
