Light sweet crude for July delivery declined 1.5 percent or $1.22 to $80.23 a barrel, the lowest level in eight months, in electronic trading on the New York Mercantile Exchange during the European trading hours.
Meanwhile, Brent crude oil futures for July delivery fell 1.46 percent or $1.35 cents to $91.34 a barrel, the lowest level in 17 months, on the ICE futures exchange in London.
Crude oil futures declined to their lowest level in eight months Wednesday after the data from U.S. Energy Information Administration (EIA) showed that oil inventories grew by 0.7 percent or 2.9 million barrels to 387.3 million barrels last week, the highest level since July 1990, while analysts had forecasted a1.1 million barrel decline for the week ended June 15. The EIA also said gasoline inventories rose by 900,000 barrels, and supplies of distillates rose by 1.2 million barrels.
Oil futures prices were also weighed down by the Federal Reserve's limited help to revive the domestic economy. Fed opted to extend its Maturity Extension Program (MEP), also called Operation Twist, for another six months, but there was no new large scale asset purchase program (QE3). The MEP was originally due to finish at the end of this month, but the Fed will now keep it going until the end of this year.
Some market participants were expecting QE3 (a third round of quantitative easing), and will be disappointed yet again. The stimulus announced today is very modest, Jason Schenker at Prestige Economics in Austin was quoted as saying by Reuters.
Meanwhile, news that China's manufacturing activity continued to contract for the eighth straight month also added to the down side. The HSBC Flash Purchasing Managers Index (PMI), a measure of the nation-wide manufacturing, declined to 48.1 in June compared to 48.4 in May.
Oil prices have plunged more than 23 percent in the last one month, following concerns over the deepening euro zone sovereign debt crisis and waning global oil demand.
On Wednesday, light sweet crude for July delivery plunged 2.7 percent or $2.23 and settled at $81.80 a barrel, the closing level since October 5, on the New York Mercantile Exchange while light sweet crude for August delivery slumped 3.4 percent or $2.90 and settled at $81.45 a barrel.