Oil prices fell below $75 a barrel Thursday as the dollar strengthened further against the euro and traders considered signs of tepid U.S. crude demand against growing consumption in developing economies.
By early afternoon in Europe, benchmark crude for June delivery was down 74 cents at $74.91 a barrel in electronic trading on the New York Mercantile Exchange. The June contract lost 72 cents to settle at $75.65 on Wednesday.
Lower prices were seen to be caused in part by the dollar's, which makes oil priced in dollars more expensive for investors holding other currencies.
The euro fell to US$1.2592 in European trade from US$1.2631 late Wednesday in New York, while the British pound was down to US$1.4764 from US$1.4821.
"Investors are expected to keep an eye on the U.S. dollar/euro movements ... considered to be the main drivers of current crude oil prices in the near term, as volatility still dominates the energy market due to the European economic uncertainty," said a report from Sucden Financial in London.
In the United States, crude inventories keep rising, defying analyst predictions that a recovering economy would boost demand. The Energy Information Administration said Wednesday that oil supplies increased more than expected last week as stockpiles grow for 14 of the last 15 weeks.
Supplies at the key Cushing, Oklahoma terminal jumped to a record high.
"Fundamentals in the U.S. are still pretty weak, and those massive Cushing stocks keep getting bigger," said Ben Westmore, an energy analyst with National Australia Bank in Melbourne.
Soma analysts viewed the drop in gasoline inventories, which had been expected to rise, was a possible sign of recovering demand.
"All factors considered, this was a more bullish then bearish report," said U.S. energy consultancy Cameron Hanover.
The Paris-based International Energy Agency said Wednesday that global oil demand this year was expected to rise 220,000 barrels a day less than it previously forecast.
Investors are looking to surging demand from developing countries, such as China and India, to bolster oil prices.
"In non-Japan Asia, the fundamentals are a lot rosier," Westmore said. "Prices in the mid- to high-$70s seem to be fair."
In other Nymex trading in June contracts, heating oil rose 0.49 cents to $2.1736 a gallon, gasoline fell 0.47 cent to $2.2057 a gallon. Natural gas gained $1.6 cents to $4.300 per 1,000 cubic feet.
In London, Brent crude was down 25 cents to $81.95 on the ICE futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.