Oil prices slump $3 in fierce sell-off

Oil prices plunged on Wednesday, mirroring global equities, as traders fretted over a looming "fiscal cliff" in the United States following President Barack Obama's re-election and gloomy EU economic forecasts.

Sentiment was also dented by profit-taking, a stronger dollar and disappointing US crude inventories data that signalled weak demand in the world's biggest oil consuming nation.

In late afternoon deals, Brent North Sea crude for delivery in December tumbled $3.48 to $107.59 per barrel, having briefly climbed above $111 in the wake of Obama's triumph.

New York's main contract, light sweet crude for December or West Texas Intermediate (WTI), slumped $3.47 to $85.24 a barrel.

Wall Street shares dived two percent on Wednesday, pulling European equities sharply lower, as President Barack Obama's re-election victory set up a tough battle with Republicans over a looming "fiscal cliff".

Obama won a resounding victory over Republican challenger Mitt Romney for another four-year term in a closely fought race late Tuesday.

However, voters left Congress divided, with Democrats maintaining the Senate and Republicans holding the House of Representatives.

Elsewhere, new EU forecasts showed that Europe's economic prospects have dimmed considerably, and pointed to a drawn-out and painful recovery before any return to growth.

The European Commission slashed its eurozone economic growth forecast for next year to just 0.1 percent, six months after tipping a much stronger recovery of 1.0 percent.

The news sent the euro tumbling to $1.2737 in intra-day trade, which was the lowest level since September 7. A stronger greenback tends to hit dollar-priced oil, which becomes more expensive for buyers using weaker currencies.

Official data meanwhile revealed slumps in German and Spanish industrial output during September.

"Crude oil began the day higher as investors in Asia and Europe woke up to news that Obama was re-elected as the President of America," said analyst Fawad Razaqzada at trading group GFT Markets.

"However the gains quickly evaporated and by lunch time both Brent and WTI had turned lower.

"Sentiment turned sour on Mario Draghi's comments about the eurozone economy and after some disappointing data releases.

"What really pulled the rug from under the remaining bulls was news that the European Commission had slashed its growth forecast for the eurozone across the board."

In addition on Wednesday, the US government's Energy Information Administration revealed that American crude inventories climbed 1.8 million barrels in the week ending November 2. Rising stockpiles indicate weaker demand.

Gasoline or petrol reserves meanwhile jumped 2.9 million barrels as superstorm Sandy crimped driving in the northeastern US and forced many fuel terminals to halt operations.

Traders also took the opportunity take profits after the market had soared by more than $3 on Tuesday, in line with Wall Street gains and the weaker dollar, as Americans headed to the polls.

The oil market began the week on a sour note, plunging to three-month lows on Monday as traders worried over uncertainty over the crucial race between Obama and Romney.

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