Traders shrugged off OPEC's decision to keep production levels steady and a big drop in overall U.S. crude stockpiles.
Organization of Petroleum Exporting Countries ministers said Wednesday in Abu Dhabi,well supplied," with crude reserves at comfortable levels. United Arab Emirates, the cartel would leave output unchanged "for the time being," because the world was "
Light, sweet crude for January delivery fell 92 cents to $86.57 a barrel in Asian electronic trading on the New York Mercantile Exchange by late afternoon in Singapore.
The contract fell 83 cents in Wednesday's floor session to settle at $87.49 a barrel, oil's lowest close since Oct. 24.
Oil prices have dropped more than $10 from all time-highs near $100 in November on evidence of rising inventories at Cushing, Okla., the closely watched Nymex delivery terminal. Speculation that OPEC would boost supplies and evidence that some OPEC countries are producing more oil than their quotas have also pressured prices.
Despite holding output steady, OPEC ministers plan to meet again Feb. 1 to review their decision.
Meanwhile, the U.S. Energy Department's Energy Information Administration reported that crude supplies plunged by 8 million barrels last week, much more than the expected 700,000 barrel decline.
But the report was mixed as it also said crude inventories in Cushing, Okla., rose 700,000 barrels during the week ended Nov. 30, the third week in a row supplies there have grown.
Activity at the Cushing terminal is studied closely by oil traders, because it is the physical delivery point for Nymex crude. Falling supplies there are seen as a symptom of a tight market, and those concerns ease when Cushing inventories rise.
Refinery activity was unchanged last week at 89.4 percent of capacity. Analysts surveyed by Dow Jones Newswires, on average, had expected refinery utilization to rise by 0.1 percentage point to 89.5 percent of capacity.
Supplies of gasoline rose by 4 million barrels, much more than the 700,000-barrel increase analysts had expected. Inventories of distillates, which include heating oil and diesel fuel, rose by 1.4 million barrels, countering analyst expectations for a 400,000-barrel decline.
Some of the decline in crude supplies can be explained by oil imports, which fell last week by an average of 980,000 barrels a day to 9.4 million barrels a day. Gasoline imports rose last week by 334,000 barrels a day to an average of 1.2 million barrels a day.
Gasoline demand slid last week by about 90,000 barrels, and is up by 0.2 percent over the last four weeks compared to the same period last year, the EIA said. Analysts consider year-over-year demand growth of less than 1.5 percent to be low.
Heating oil futures dropped 2.25 cents to $2.4668 a gallon while gasoline prices lost 1.3 cents to $2.2040 a gallon. Natural gas futures added 0.2 cent to $7.187 per 1,000 cubic feet.
In London, January Brent crude futures fell 70 cents to $87.79 a barrel on the ICE Futures exchange.
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