Oil dives over four percent

Oil slid more than 4 percent on Wednesday, as signs of further economic weakness fed demand worries and a rising dollar weighed, triggering technical sell stops and sending US crude to its lowest since February.
US crude weakened early on data showing a rise in core inflation and shrinking New York manufacturing. It succumbed to intensifying selling pressure as it broke below the 150-day moving average and $95 key support. That eradicated brief gains after a big drop in weekly US crude stocks, reported mid-morning.
US July crude fell $4.56 and settled at $94.81 a barrel, the lowest settlement since February 22. It hit a session low of $94.01, also the lowest since that day.
Brent crude for July delivery expired and settled $3.06 lower at $117.10, after hitting a session low of $116.80. The August contract settled down $6.34 at $113.01.
Brent's premium against US benchmark West Texas Intermediate for the second-month August contract narrowed by $1 to around $18 a barrel after the July spread had blown out to a record $22.80 on Tuesday.
"It's a rush for the exits. The market has been overvalued for some time now...the Brent market has been a bubble and the bubble is bursting today," said Tim Evans, energy analyst at Citi Futures Perspective.
"In my opinion, WTI would be fairly valued at $85 a barrel and Brent at $90 a barrel," Evans added.
The slump came as the US dollar extended gains for its biggest daily rise since August, with the dollar index up 1.7 percent, while the S&P 500 stock index tumbled by more than 2.0 percent to its lowest level since March.
The euro slid against the dollar, heading for its worst day in more than a month on worries about the Greek debt crisis.
Greek Prime Minister George Panpandreou, said he will form a new government on Thursday and seek a vote of confidence from his parliamentary group after street protests against his austerity plans.
The session reminded oil traders of early May, when prices swooned twice from recent highs.
Other commodities also fell, with corn slumping toward its biggest three-day loss in a year and a half. The Reuters-Jefferies CRB index fell 2.5 percent.
US core consumer inflation rose more than expected in May to post its largest increase in nearly three years, which could prompt the Federal Reserve to increase interest rates sooner rather than later.
A separate report showed manufacturing in New York State unexpectedly shrank for the first time since November, surprising economists who had expected a rise.
Macroeconomic conditions and debt fears overshadowed weekly oil inventory data, which confirmed a much larger than expected decline in stocks due in large part to a reduction in Midwest supplies as a key Canadian pipeline shut down.
Canada's TransCanada Corp said it was curtailing oil shipments by 11.5 percent on the 591,000 barrel per day Keystone pipeline as it works on the line's facilities following two oil spills last month.