Crude Oil Ends Lower After ECB Rate Decision

(RTTNews) - U.S. crude oil ended lower on Thursday, after the European Central Bank moved to cut interest rates and lower rates on bank deposits parked overnight with the central bank to negative, to tackle the low inflation threatening to derail the fragile economic recovery of the euro area.

Oil prices were also impacted after an official weekly oil report from the Energy Information Administration yesterday showed gasoline and distillate stockpiles to have increased significantly.

The ECB, led by President Mario Draghi, cut the refinancing rate to a record low 0.15 percent from 0.25 percent, following its policy meeting in Frankfurt earlier today. Economists expected a deeper cut in the refi rate to 0.10 percent.

The ECB also slashed the deposit rate, which was already at zero, to -0.10 percent, which in effect would charge Eurozone banks for parking excess funds at the ECB. The decision was in line with economists' expectations. The marginal lending rate was also lowered by 35 basis points to 0.40 percent.

Earlier, the Bank of England left its interest rate unchanged at a historic low of 0.5 percent.

From the U.S., a Labor Department report on Thursday showed a modest rebound in initial jobless claims in the week ended May 31, although the four-week moving average dropped to its lowest in about seven years.

Light Sweet Crude Oil futures for July delivery, the most actively traded contract, dropped $0.16 or 0.2 percent to close at $102.48 a barrel on the New York Mercantile Exchange Thursday.

Crude prices for July delivery scaled a high of $102.69 a barrel intraday and a low of $101.60.

On Wednesday, crude oil futures ended flat despite an official weekly report from the Energy Information Administration that showed crude oil stockpiles in the U.S. to have declined much more than anticipated.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.47 on Thursday, down from its previous close of 80.67 late Wednesday in North American trade. The dollar scaled a high of 81.02 intraday and a low of 80.41.

The euro traded higher against the dollar at $1.3641 on Thursday, as compared to its previous close of $1.3599 late Wednesday in North American trade. The euro scaled a high of $1.3653 intraday and a low of $1.3504.

In economic news from the U.S., data from the Labor Department showed initial jobless claims to have risen to 312,000 in the week ended May 31, an increase of 8,000 from the previous week's revised level of 304,000. Economists expected claims to climb to 310,000 from the 300,000 originally reported for the previous week.

Nonetheless, the less volatile four-week moving average dipped to 310,250, a decrease of 2,250 from the previous week's revised average of 312,500. This indicated the four-week moving average at its lowest level since hitting 307,500 in the week ended June 2, 2007.

In a significant move, the European Central Bank on Thursday cut its key interest rate to a record low of 0.15 percent and slashed its deposit rate to below zero, aiming to boost growth. Economists had expected a deeper cut in the refi rate to 0.10 percent.

The ECB also said more stimulus is on the way in the form of an undetermined amount of asset-backed security purchases.

ECB president Mario Draghi said the bank will offer long-term loans to banks at cheap rates for the next few years. Draghi also stated that more unconventional measures are likely it inflation stays too low.

Earlier, the Bank of England left its lending rate unchanged at a historical low of 0.5 percent.

Meanwhile, the U.S. Fed's Beige Book indicated the economy to have been growing at decent pace since the warmer weather, with all twelve of the Federal Reserve districts reporting an increase in activity in the past few months.