Energy

US crude posts 46% annual loss, largest since 2008

Reuters with CNBC.com staff
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Crude oil inventories down 1.8 million barrels
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Crude oil inventories down 1.8 million barrels

U.S. crude for February delivery settled 85 cents lower, at $53.27 per barrel, the lowest since May 2009. The contract posted a 46 percent annual loss, making 2014 its worst year since 2008.

was last down 40 cents at $57, after dropping as low as $55.81, the weakest price since May, 2009.

U.S. commercial crude inventories declined more than expected last week, falling by 1.8 million barrels, according to data from the U.S. government's Energy Information Administration.

A Reuters poll forecast U.S. crude inventories would show a drop of 900,000 barrels in the week ending Dec. 26, after a rise to their highest recorded level for December in the previous week.

Brent crude was heading for its biggest annual decline since 2008, pressured by weakening demand and a supply glut prompted by the U.S. shale boom and OPEC's refusal to cut output.

Global benchmark Brent crude has fallen 49 percent in 2014 as demand growth slowed, the United States expanded output and OPEC, dropping its strategy of trimming supply to keep oil around $100 a barrel, chose instead to defend market share.

On Wednesday, prices came under pressure from a survey showing China's factory sector shrank for the first time in seven months in Decembera bearish indication on the strength of oil demand in the world's second-largest consumer.

"Clearly, demand concerns are one of the issues for the oil market," said Michael McCarthy, chief market strategist at CMC Markets.

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In the previous session, both Brent and U.S. crude hit their lowest levels since May 2009.

Just beginning of reaction to low oil: Pro
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Just beginning of reaction to low oil: Pro

The annual decline for Brent is set to be the biggest since 2008, when demand crumbled in response to the financial crisis. Prices were eventually propped up by OPEC's last formal decision to cut production.

In contrast, OPEC at a Nov. 27 meeting this year decided against a cutback to defend its market share against shale oil and other competing supply sources, despite its own forecasts of a growing surplus in 2015.

Turmoil in Libya has effectively led to a drop in OPEC supply in December to a six-month low, a Reuters survey showed on Tuesday, although forecasts still point to a large excess supply next year.

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The Obama administration on Tuesday bowed to months of growing pressure over a 40-year-old ban on exports of most domestic crude, taking two steps expected to increase the flow of ultra-light oil, or condensate, onto the global market.

"We expect a gradual, but slow increase of stabilized condensate exports over the next year," analysts at JBC Energy said in a report.