Oil futures fall

Crude futures fell back on Wednesday, weighed down by an unexpected increase in US stockpiles and doubts that a credible deal to resolve Europe's debt crisis will be reached at a summit on Friday. Trading was choppy, with losses pared after the euro recovered against the dollar around midday ahead of Thursday's policy-setting meeting of the European Central Bank.
In London, ICE January Brent crude settled at $109.53 a barrel, falling $1.28, after having hit session low of $109. US January crude settled at $100.49, down 79 cents, after dropping to the day's low of $99.67. Brent's premium against US crude narrowed slightly to $9.04 at the close, from $9.53 on Tuesday. Brent crude trading volume was down about 17 percent from its 30-day average, according to Reuters data. US crude dealings were 6 percent above the 30-day average.
The day's losses erased gains posted in Tuesday's session - during which investors saw a warning of a mass eurozone downgrade from Standard & Poor's as a catalyst to force European Union leaders to take more decisive action to contain the eurozone debt crisis. "The market seems unwilling to fall too far ahead of the EU meeting and the euro has bounced back also," said Tom Bentz, director at BNP Paribas Prime Brokerage Inc in New York
The euro recovered losses to trade slightly higher against the dollar with investors positioned for the policy setting meeting of the European Central Bank on Thursday. Expectations of an interest rate cut this week by the ECB, were reinforced after European statistics agency Eurostat confirmed estimates pointing to weakening growth in the region.
Crude futures on both sides of the Atlantic set session lows earlier in the day after data from the US government data showed that domestic crude oil stockpiles rose 1.34 million barrels last week, going against analysts' forecast in a Reuters poll for a 600,000 barrel drawdown.
Distillate and gasoline stocks also rose to levels much larger than expected, also pressuring oil futures. Pessimistic comments from Germany on the chances of a deal to solve the debt crisis and new data exposing growing stress among Europe's banks took the shine off hopes in financial markets of a turning point in the region's sovereign debt troubles at this week's meeting. "The oil market is easily disappointed. People are a bit wary," said Seth Kleinman, an analyst at Citigroup.
Saudi Arabia said it was pumping oil at the highest rate for decades in a signal that it intends to meet customer demand with more output if necessary. The kingdom produced 10.047 million barrels per day of crude oil excluding condensate in November, a senior Saudi oil official told Reuters.
However, some analysts raised scepticism about the accuracy of the data, saying it may simply be pre-Opec meeting build-up in communication, with the Saudis showing strength as the main holder of spare production capacity. The Organisation of the Petroleum Exporting Countries is due to meet on December 14 in Vienna to discuss output policy for early 2012.