Oil fell on Wednesday as worries about Europe's debt crisis re-emerged, pressuring the euro to a 16-month low against the dollar, while data showed that US crude inventories soared. Early in the session, crude futures rose after an Iranian nuclear scientist was killed by a car bomb, an incident that Tehran blamed on Israeli and US agents. The news added to worries that Mideast tensions could lead to a supply disruption from Iran.
But worries about European debt reasserted themselves after ratings agency Fitch urged the European Central Bank to ramp up buying of eurozone debt. Brent February crude fell $1.04, or 0.92 percent, to settle at $112.24 a barrel, having traded from $112.11 to $113.76. US February crude fell $1.37, or 1.34 percent, to settle at $100.87 a barrel, having traded from $100.55 to $102.46.
Brent's premium against US crude widened slightly to around $11.25, after closing at $11.04 on Tuesday. Brent trading volume shot up nearly 40 percent from its 30-day average, Reuters data showed. US crude volume was down 13 percent from its 30-day average.
Losses were pared on news that the biggest oil workers' union in Nigeria, Africa's largest oil producer, was putting oil platforms on red alert in preparation for shutting down production, part of protests against the removal of fuel subsidies. US crude stockpiles jumped 5.0 million barrels last week as imports soared to their highest level in 18 months, data from the US Energy Information Administration showed. Distillate stocks rose 4.0 million barrels and gasoline supplies added 3.6 million barrels, both well above expectations, the EIA data also showed.
"The EIA data was moderately bearish (but) events out of the Middle East and Europe will continue to dominate the direction of energy prices for the foreseable future," said Chris Jarvis, president of Caprock Risk Management in Rye, New Hampshire. Oil investors fretted about mounting tensions between the West and Iran. The car bombing came as the United States has been seeking to persuade China to help toughen sanctions against Tehran over its disputed nuclear program.
Israel declined to comment on the incident and the White House denied any US role. The recent spike in oil prices has been fuelled by threats from Iran to choke the West's supply of Gulf oil. The United States warned that its navy was ready to open fire to prevent any blockade of the strategic Strait of Hormuz.
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