Crude oil futures plunged ahead of the close Wednesday, tracking losses in equities after the US Federal Reserve said prospects for economic growth continued to struggle.
NYMEX November crude futures settled $2.23 lower at $86.11/barrel and ICE December Brent settled down $2.76 at $108.39/b after hitting a session low of $108.13/b.
The December Brent/WTI spread continued to narrow, settling at $22.10/b from $22.81/b on Tuesday.
In products, NYMEX November heating oil settled down 4.65 cents at $2.9812/gal and November RBOB settled 7.54 cents lower at $2.6715/gal.
Crude futures had held onto slight gains for the most of the session before the late-day drop, supported by a 4.729 million-barrel decline in US commercial crude inventories to 332.899 million barrels for the week ending October 14, according to the US Energy Information Administration Wednesday.
But oil futures followed a plunge in equities late in the session after the Fed said in its Beige Book survey that although overall economic activity continued to expand in September, many of its 12 reporting districts across the country described the pace of growth as "modest" or "slight" and noted weaker or less certain outlooks for business conditions.
The move led to a negative turn in the Dow Jones Industrial Average and the S&P 500 Index, which fell about 1%.
The DJIA was down more than 76 points at 11,500 by the NYMEX settle and the S&P 500 was nearly 15 points weaker at 1,210.
The US Dollar Index on ICE pushed off lows and was near flat at 77.125 by the NYMEX settle.
NYMEX RBOB futures shrugged off a larger-than-expected stock decline as investors focused on a drop in demand, reported by the EIA.
The data showed a 3.324 million-barrel decline in gasoline stocks to 206.271 million barrels, outpacing analyst expectations of a 1.25 million-barrel draw.
But gasoline demand fell 412,000 b/d to 8.598 million b/d.
"The RBOB headline number was bullish on the surface and exports are very supportive, however the week-on-week demand data is horrid, down 4.6% and dropping below 9 million barrels to a very weak 8.5 [million b/d]," said Mike Guido, associate director of hedge fund sales at Macquarie.
Analyst Gene McGillian of Tradition Energy said late-day focus in the oil complex also turned back to the European debt crisis after leaders from Germany, Frank, the International Monetary Fund and the European Central Bank had a last-minute meeting in Frankfurt ahead of a crucial summit on Sunday in Brussels.
"The EIA data was bullish for crude but once you read deeper to see that we don't have a positive demand picture oil went back to trading on [financial] markets with extreme volatility and concern over global economic conditions," McGillian said.
