Oil slides on US energy report, amid European debt summit
World oil prices fell heavily on Wednesday as dealers digested fresh signs of weakening US energy demand and awaited the outcome of an EU summit aimed at resolving the euro debt crisis.
New York's main contract, light sweet crude for delivery in December, dived $1.70 to $91.47 per barrel.
Brent North Sea crude for December delivery slid $1.51 to $109.41 a barrel in London late afternoon trade.
The market sold off in afternoon deals after the US government's Department of Energy revealed that American crude oil inventories increased by 4.7 million barrels in the week ending October 21.
The weekly report indicated weakening demand in the United States, which is the world's biggest oil-consuming nation.
Expectations had been for a much smaller increase of just 400,000 barrels, according to analysts polled by Dow Jones Newswires.
Investors also remain focused on Brussels, where European leaders have begun their second summit in three days on the long-running crisis that has dogged global financial markets for months.
Markets are demanding a watertight deal to dispel fears the crisis could threaten the euro project and spark another fierce worldwide recession -- which would slash demand for key commodities like crude oil.
Ahead of the summit, German Chancellor Angela Merkel declared that weaknesses in the euro must be addressed now or never, as she clinched broad parliamentary support.
"If there is decisive action on the part of leaders, then I think you could see investors' appetite for risk expand which would be bullish for commodities, although it really does depend on what is agreed," said analyst Damien Cox at consultancy EnergyQuote JHA in London.
"It remains to be seen whether a deal is agreed that paves the way for a long-term fix or not. If it appears only temporary then any sense of optimism could evaporate," Cox told AFP.
European Union presidents and prime ministers face intense pressure to deliver on a promise to fix the crisis.
Markets hope that the summit will agree a huge write-off of Greek debt, a recapitalisation of Europe's banks, and expansion of the eurozone bailout fund to prevent contagion in the likes of Italy and Spain.
"It has been quite obvious over the last week that macro events have been the main driver behind the trends. Which is no surprise considering what is at stake," said oil analyst Filip Petersson at Swedish bank SEB.
"I definitely think that the outcome today will set the direction over the coming weeks, but I do not think that crude oil prices will be held down for long if it is a negative outcome.
"Inventories are low or at least falling, the sweet crude market remains tight and heating season is approaching" in the northern hemisphere winter months, he added.
© 2011 AFP