ECB forecast cuts send oil lower

Oil prices sank along with the euro Thursday after the European Central Bank forecast that the eurozone would continue to contract next year and only return to growth in 2014. New York's main contract, WTI crude for delivery in January, recoiled $1.62 to $86.26 a barrel. In London trade, Brent North Sea crude for January dived $1.78 to $107.03 a barrel. The falls paralleled that of the euro, which sank about 0.8 percent after the ECB announcements following its policy board meeting. In its regular quarterly staff economic projections, the ECB forecast that the euro area economy will shrink by 0.5 percent in 2012 and another 0.3 percent in 2013, instead of growing by 0.5 percent next year as previously estimated. The Frankfurt-based central bank also opted not to cut its benchmark interest rate, but ECB chief Mario Draghi left the door open for one in the future. "Crude oil extended its losses today on a combination of technical selling and growth concerns after the ECB trimmed its GDP forecasts for the eurozone," said analyst Fawad Razaqzada at trading group GFT Markets. No break in the impasse over the fiscal cliff in Washington meanwhile kept a cloud over the oil market in afternoon trade. Congress and the White House have until the end of the month to come up with new legislation to avert the harsh spending cuts and tax hikes programmed for January under the "cliff" package.