Crude prices suffered the worst drop since September on Wednesday as the Organization of the Petroleum Exporting (OPEC) agreed on a higher output ceiling and the euro fell to a 11-month low against the dollar.
At the group's meeting in Vienna, all 12 members of OPEC agreed to raise the output target to 30 million barrels a day for the first half of 2012. It was the first time for OPEC to change the output target in three years. But the group didn't set individual quotas for each member nation.
The new limit was in line with the current production and was considered to be enough to enrich the lean inventories. But at the time when European debt crisis was far from resolved, more production was fatal to the already suffering crude prices.
Light, sweet crude for January delivery plunged 5.19 dollars, or 5.18 percent to settle at 94.95 dollars a barrel on the New York Mercantile Exchange. It fell below its technical support of the 200-day moving average for the first time since Nov. 25, which could mean more falls in the near terms.
In London, Brent crude for January delivery also dropped sharply by 4.82 dollars, or 4.4 percent to close at 104.68 dollars a barrel. With the January contract expires on Thursday, the more actively traded February contract plunged 5.13 dollars to 103.95 dollars a barrel.
To add to the pressures, the euro slipped further on Wednesday as Italy's five-year government bonds yield increased to an euro- era high, indicating that investors were still lack of confidence in the struggled continent even after last week's European summit. A falling euro pulled all the dollar-denominated commodities down.