Oil prices slide on strong dollar, China data
Oil fell sharply on Tuesday on the back of falling stock markets, downbeat Chinese data and the stronger dollar, which makes the commodity more expensive for buyers using weaker currencies and tends to hit demand.
New York's main contract, light sweet crude for delivery in July, dropped 2.06 dollars to 71.91 dollars a barrel.
London's Brent North Sea crude for July plunged 2.86 dollars to 71.79 dollars per barrel.
"The firmer US dollar causes strong headwinds," said Commerzbank analyst Carsten Fritsch.
European stock markets slumped and the euro hit a new four-year low at 1.2111 dollars on concern eurozone banks may have more skeletons to show in their balance sheets.
The US unit also won support as investors sought safety amid jitters over Israel's deadly Gaza ship raid.
Oil traders also digested data showing that China's purchasing managers index (PMI) had slipped in May to 53.9 from 55.7 in April.
A separate PMI study by HSBC revealed a drop to 52.7 from a revised 55.2 the previous month. A reading above 50 means the sector is expanding, while below 50 indicates an overall decline.
"The larger than expected decline of the Chinese PMI causes concerns that growth dynamics and thus also the demand for oil in China might weaken," added Fritsch at Commerzbank.
"The persistently high demand for oil in China and India was the supporting pillar of global demand growth for oil during the past months.
"Up to now, there seems to be no weakening of the demand for oil in these two countries, though."
The PMI figures follow a number of measures announced by Beijing aimed at cooling the country's blistering growth -- it expanded 11.9 percent in the March quarter -- including tightening lending by banks.
"Oil prices were lower ... as sentiment regarding the outlook for growth in China weakened," said Westhouse Securities analyst David Hart.
"On the other hand, according to estimates in the United States, the summer driving season is getting off to a strong start which would be supportive."
Crude prices are expected to win support in the coming weeks with the onset of the summer in the United States, when many Americans take to the road for their holidays.
Meanwhile, BP shares crashed more than 15 percent on Tuesday after the British energy giant failed in its latest attempt to plug the spilling undersea oil well in the Gulf of Mexico.
The share price dived 15.49 percent to 418.15 pence as investors as BP also admitted that response costs linked to the oil spill disaster currently stand at about 990 million dollars (811 million euros).
The embattled group announced on Saturday that its risky "top kill" operation to plug the ruptured oil well in the Gulf of Mexico had failed, adding it would shift to a new strategy to cap the leak.
Engineers had spent days pumping heavy drilling fluid into the leaking well head on the ocean floor in a high-pressure bid to smother the gushing crude and ultimately seal the well with cement.
© 2010 AFP