Investing.com - Crude oil futures dropped to a one-week low during U.S. morning hours on Thursday, coming under heavy selling pressure after European Central Bank President Mario Draghi cut the outlook for economic growth at the bank’s post-policy meeting press conference.
Market players also continued to monitor negotiations among U.S. lawmakers to avoid the looming “fiscal cliff” crisis, while looking ahead to Friday’s key U.S. nonfarm payrolls data.
On the New York Mercantile Exchange, light sweet crude futures for delivery in January traded at USD86.62 a barrel during U.S. morning trade, down 1.4% on the day.
New York-traded oil prices fell by as much as 1.5% earlier in the day to trade at a session low of USD86.28 a barrel, the weakest level since November 28.
Speaking at the ECB’s post-policy meeting press conference, Draghi said that risks to the outlook remain weighted to the downside.
Policymakers now expect 2012 gross domestic product to shrink between 0.4% and 0.6%, while GDP is expected to come in between a 0.9% contraction and growth of 0.3% in 2013.
In September, the ECB had forecast 2013 GDP to range between a contraction of 0.4% and growth of 1.4%.
Draghi’s comments came after the ECB left rates on hold at a record low 0.75% earlier, in a widely anticipated decision.
The downbeat growth outlook prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets, such as the U.S. dollar.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.3% to trade at 80.03, erasing an earlier loss of as much as 0.1%.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.
Oil traders now looked ahead to Friday’s key U.S. nonfarm payrolls data for November, as investors attempt to gauge the strength of the U.S. economy and the need for further monetary stimulus from the Federal Reserve.
Data released earlier showed that the number of people who filed for unemployment assistance in the U.S. fell by 25,000 to a seasonally adjusted 370,000.
Meanwhile, investors continued to monitor developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1, unless a divided Congress and the White House can work out a compromise in the four weeks left before the deadline.
President Barack Obama reassured markets Wednesday, saying that if Republicans accept tax hikes on wealthier Americans, a deal could be pushed through in "about a week."
President Obama said recently that any solution must include spending cuts and raising revenue, including increasing taxes on the wealthiest. Republican leaders say they will agree to higher revenue, but they want to close loopholes or reduce tax breaks rather than raise rates.
Without a deal, the U.S. could fall back into recession and drag much of the world down with it.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery fell 0.9% to trade at USD107.81 a barrel, with the spread between the Brent and crude contracts standing at USD21.19 a barrel.