Brent crude oil fell below $ 108 a barrel after comments by European Central bank President Mario Draghi raised the prospect of further weakness in the euro zone and a bleaker outlook for oil demand.
Oil prices reacted to the statement swiftly, falling more than 50 cents per barrel. Brent crude was down $ 1.25 to $ 107.56 a barrel by 1430 GMT, after dropping for the past three sessions. US crude lost $ 1.35 to $ 86.53 a barrel.
The oil market was already worried about the prospects for oil demand.
The US faces year-end tax increases and spending cuts that threaten to push the world’s largest economy back into recession and dent demand from the world’s top oil consumer. The US economy is growing again after a long slowdown, but economic activity is still sluggish and unemployment is high.
Ahead of the country’s monthly non-farm payrolls, due today, private payrolls processor ADP reported that private-sector employers added 118,000 jobs in November, fewer than expected, though activity in the service sector continued to expand.
The number of Americans filing new claims for unemployment benefits fell for a third straight week, but still remain too volatile to offer a clear signal on labor market conditions.
Initial claims for state unemployment benefits dropped 25,000 to a seasonally adjusted 370,000.
“The wider range is likely to prevail a little longer in cautious (oil) trading ahead of the US November jobs report on Friday,” said Andrey Kryuchenkov of VTB Capital in London.
Oil also faced pressure after a US inventory report showed big builds in oil products, with gasoline stocks up by the highest margin since 2001, surging by 7.86 million barrels to 212.12 million barrels in the week to Nov. 30.
The US Energy Information Administration said US stocks of distillates — diesel and heating oil — also rose at a time of the year when refined oil stocks often fall.
Across the Atlantic, data showing that euro zone shoppers cut back on spending in October by the biggest margin in six months also weighed on oil prices.
Ahead of OPEC’s policy setting meeting next week, analysts eye the future development of production quotas.
“The question is, will OPEC actually cut production which they should and need to do in the first half of 2013,” said Bjarne Schieldrop, chief commodity analyst at SEB.
“People are also thinking more about softer seasonal demand in the first half of the year.”
Brent crude falls below $108
