LONDON: Oil prices slid below $72 a barrel on Wednesday and looked set to fall for a third straight session after a raft of negative data stoked concerns about the impact of the European debt crisis on the still fragile global fuel demand recovery.
Investors have had less appetite for buying oil after a series of reports released the previous day showed manufacturing growth fell across the globe in May.
Falling European shares and the euro’s slide to near four-year lows continued to quell buying interest on Wednesday. A weak euro makes dollar-denominated oil more expensive for holders of the currency.
U.S. crude prices for July fell 60 cents to $71.98 a barrel at 1045 GMT, after losing nearly 2 percent on Tuesday in a volatile session where prices swung in a $4 range.
ICE Brent dropped 45 cents to $72.26 a barrel.
"The path of least resistance still seems to be lower for energy prices given the headwinds emanating from a number of exogenous markets.
These include a weaker euro…and a quesy US equity market," said analyst Edward Meir of MF Global.
Sentiment in the oil market has been sour since US crude posted a 14 percent monthly loss in May as the market weighed the impact of the spreading European debt crisis on demand in previously robust growth centers such as Asia.
In late May, money managers flushed out long positions in crude oil and this contributed to the sharpest monthly fall in prices since 2008.
"We could have some stability. The current level takes into account the fact that the recovery appears to be slowing but also the fact that we are not going to have a double dip," said analyst Christophe Barret at Credit Agricole CIB, adding that the chances of a V-shaped recovery now seem remote.
Technical chart analysts think oil prices could fall towards the next key support cushion of $70 a barrel.
This level is also the low point of the $70-$80 range that the Organization of the Petroleum Exporting Countries (OPEC) deems satisfactory for both producers and consumers.
OPEC’s reference basket price on Tuesday was also above the critical $70 threshold at $70.98 a barrel, the group said on Wednesday.
Analysts said the market was likely to focus on weekly stocks data out of the U.S. later on Wednesday for the next clue on demand prospects in the world’s biggest oil consumer.
While the data is always a key market mover, this week’s results are likely to be more closely scrutinized ahead of the US gasoline season which officially began last weekend with the Memorial Day holiday.
US crude oil inventories are forecast to have slipped by 200,000 barrels last week and gasoline stocks are expected to fall by 500,000 barrels.
Industry group American Petroleum Institute will issue its report at 2030 GMT on Wednesday while the more authoritative data from the US Energy Information Administration is delayed until 1500 GMT on Thursday because of a US holiday on Monday. –Additional reporting by Alejandro Barbajosa
