Oil slips nearly two percent

Crude oil futures slumped nearly 2 percent on Wednesday as weak economic data from Europe, China and the United States painted a sombre outlook for global oil demand. An unexpected heavy drawdown in US crude stockpiles failed to staunch the day's decline spurred by weak demand in a German bond auction, which stirred concerns the eurozone 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. By 2:40 pm EST (1940 GMT), ICE January Brent futures traded in London dropped $1.79 to $107.24 a barrel, having fallen to a session low of $106.82. Brent crude has weakened for the sixth day out of seven.
US January crude settled $1.84 lower, or 1.88 percent, at $96.17, after skidding to a session low of $95.35. US crude has fallen for the fourth time in five sessions. Brent's premium against US crude slid slightly, to around $10.80, after hitting $11.02 on Tuesday. Trading volumes were light, with US dealings down 42 percent from the 30-day average, ahead of the Thanksgiving Day holiday on Thursday, according to Reuters data. Brent crude volume was off 30 percent from the 30-day average.
US crude inventories fell a whopping 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 US 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 wobbly oil markets have caused J.P. Morgan Chase & Co to lower its Brent and US 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 US 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.