Europe close: Oil price drop weighs on stocks

Europe's main equity benchmarks closed near their session lows, weighed down by a renewed slide in global energy prices after Saudi Arabia signaled it would not let up the pressure on higher cost-producers and rivals.

In holiday-thinned trade in the last full session of the year for financial markets, the benchmark Stoxx Europe 600 lost 0.54% to finish at 367.70.

France’s CAC 40 was lower by 1.08% to 10,743.01 and Germany’s DAX was off by 1.08% to 10,743.01 after a half-day session, its last for 2015.

Meanwhile, the recovery in oil prices proved fleeting as they were under pressure again on Wednesday.

West Texas Intermediate was down 3.01% at $36.73 as of the close and Brent crude was 2.97% lower at $36.70, as worries about slowing demand and high supply continued to weigh.

Over the seven days ending on 25 December, stockpiles of commercial US crude oil rose by 2.6m barrels from the previous week to reach 487.4m, according to the Energy Information Administration, the US Department of Energy’s statistical arm.

Analysts had been expecting a drop of 1m barrels.

That sent a sub-index of Oil&Gas shares on the Stoxx 600 1.13% lower, while the Basic Resources sub-index lost 0.86%.

Forecasts that a cold snap in Europe could be short-lived also left a dent in oil prices.

Comments from the International Monetary Fund’s managing director Christine Lagarde did little to help lift the mood.

In a guest article for German daily Handelsblatt, she said global economic growth will be "disappointing" next year.

"In many countries the financial sector still has weaknesses and in emerging markets the financial risks are increasing.

All of that means global growth will be disappointing and uneven in 2016," she said, pointing to low productivity, ageing populations and the effects of the global financial crisis.

In corporate news, shares in aerospace and defence group Rolls-Royce drifted lower following a report that MPs are set to meet boss Warren East to discuss his restructuring plans amid concerns for UK jobs.

Shares in online grocery distributor Ocado fell sharply, with market participants attributing the slump to news that Amazon plans to expand its 'Pantry' grocery delivery service in the UK.

Elsewhere, Swiss bank Julius Baer rallied after saying it has reached an agreement in principle with US authorities to settle a probe of alleged tax evasion.

Conditions in currency markets were tame, with cable ending the day 0.05% higher versus the US greenback, while the euro gave back 0.22% to stand at 1.0904.