Oil fell as much as 1.7 per cent to below $77 today as forecasts indicated tropical storm Alex would skirt the main production region in the US Gulf of Mexico, limiting disruption there to a few precautionary shutdowns.
The price drop accelerated with slumping Asian stock markets and a strengthening dollar. Shanghai's main index plunged 4 per cent, while Japan's Nikkei was poised for its worst quarter since October-December 2008 as European debt worries curbed investors' risk appetite.
US crude for August tumbled as much as $1.35 to $76.90 a barrel and was down $1.22 at $77.03 by 0622 GMT, extending Monday's 0.77 per cent decline.
Prices have still climbed 19 per cent from a May 20th trough below $65 and are about $10 lower than an early-May 19-month peak above $87. ICE Brent declined $1.01 today to $76.58.
The US National Hurricane Center forecast Alex, located about 520 miles (835 km) southeast of Brownsville, Texas, would make landfall as a hurricane near the Texas-Mexico border early Thursday.
Prices fell yesterday as the negative effect of a stronger dollar, which makes oil more expensive for Asian and European buyers, outweighed optimism about a better-than-expected report on US consumer spending. The euro was under pressure today because of funding concerns about the euro zone.
Banks must repay €442 billion to the European Central Bank on Thursday, leaving a potential liquidity shortfall in the financial system of over €100 billion.
The dollar strengthened by 0.26 per cent against a basket of currencies today.
Reuters