NEW YORK, March 21 (Xinhua) -- Oil Prices plunged Thursday as traders worried that Cyprus debt crisis could worsen.

The European Central Bank warned that it may cut Cypriot banks off from liquidity after March 25 if the country could not work out a new plan to obtain the European bailout. Cyprus struggled to raise enough money to avert financial collapse.

A possible collapse of the Cyprus banking system could tighten credit across Europe. Traders took money out the oil market, and awaited a solution to the financial crisis in Cyprus.

The economic data also signaled that the Eurozone's economy contracted more than expected in March. The Eurozone Composite Purchasing Managers' Index fell to 46.5 in March from February's 47.9.

The application for initial unemployment benefits edged up 2, 000 to 336,000 in the week ending March 16 from the previous week, the Labor Department of the United States said.

U.S. house prices increased 0.6 percent on a seasonally adjusted basis in January from a month earlier, the Federal Housing Finance Agency reported.

Light, sweet crude for May delivery dropped 1.05 dollars, or 1. 12 percent to settle at 92.45 dollars a barrel on the New York Mercantile Exchange.

Brent crude for May delivery was down 1.25 dollars, or 1.15 percent to close at 107.47 dollars a barrel.