Oil futures plunged nearly 3 percent decline in the biggest one day percentage loss since November 20.
Traders point to the sell-off across the board in commodities - with gold, silver and copper at multi-month lows - as well as oil prices breaching key technical levels as the reasons for the decline. West Texas Intermediate futures slumped to settle at $94.45 per barrel, below the 50-day moving average.
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Fundamentally, traders say bearish weekly U.S. crude inventory data, poor ADP numbers foreshadowing a weaker jobs report on Friday, and worries over Asian energy demand in light of North Korean tensions have also contributed to Wednesday's slide.
The U.S. Energy Information Administration reported that U.S. crude stocks rose 2.71 million barrels last week. The rise was slightly more than the build of 2.2 million barrels expected. U.S. commercial inventories are now the highest since 1990 and close to the record 391.9 million barrels reached in 1982, the year the EIA started tracking inventories.
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—By CNBC's Sharon Epperson; Follow her on Twitter: