Oil prices sink on poor Chinese data, eurozone tension

Prices continued to fall in afternoon London deals despite signs of stronger-than-expected energy demand in the United States, which is the world's biggest oil consumer.

Brent North Sea crude for delivery in January dived $1.88 to $107.15 a barrel.

New York's main contract, light sweet crude for January, sank $1.43 to $96.58.

"Commodity prices have continued to come under pressure from a resurgent US dollar and the continued erosion of risk appetite in the face of deteriorating economic data in Europe," said CMC Markets analyst Michael Hewson.

"Crude oil prices (are) slipping sharply despite inventory data showing a larger than expected drawdown of 6.2 million barrels."

Prices were hit by the stronger greenback, which makes dollar-priced oil more expensive for buyers holding other currencies.

The European single currency tumbled Wednesday to a fresh six-week dollar low, as a surprisingly weak German bond sale intensified concerns over the eurozone sovereign debt crisis.

At about 1600 GMT, the euro slumped to $1.3327 -- a level last seen on October 6.

Investors shunned Wednesday an issue of German 10-year bonds, considered the gold standard of eurozone debt, making bids of only 3.9 billion euros ($5.2 billion) for the 6.0 billion euros of securities on offer.

In addition, sentiment was hit by news that eurozone private sector activity retreated for the third month running in November as businesses worry about the impact of the debt crisis on the economy, according to a key survey.

Meanwhile, China's manufacturing activity slumped to its lowest level in 32 months in November, banking giant HSBC said on Wednesday, renewing concerns that the Asian powerhouse is losing steam amid global economic woes.

The preliminary HSBC purchasing managers' index (PMI) dropped to 48 in November -- the lowest since March 2009 -- compared with 51 in the previous month. A reading above 50 indicates the sector is expanding while a reading below 50 suggests contraction.

"Oil prices are under pressure on the back of negative economic data from China," added Commerzbank analyst Carsten Fritsch.

Meanwhile on Wednesday, the US government's Department of Energy announced that American crude reserves recoiled by 6.2 million barrels in the week ending November 18, indicating strengthening demand.

That compared with market expectations for a gain of 300,000 barrels according to analysts polled by Dow Jones Newswires.

The oil market was also dented by weak economic growth data in the United States. The US Commerce Department on Tuesday sharply lowered its third quarter growth estimate for the world's biggest economy to 2.0 per cent from the 2.5 per cent first stated.

Oil prices had risen earlier this week on worries that the market could tighten after several Western countries imposed economic sanctions on crude producer Iran over its nuclear programme.