Oil sinks below $74 as US crude demand eyed

[February 12, 2010]  (AP) -- Oil prices sunk below $74 a barrel Friday as the dollar strengthened and investors awaited a weekly crude supply report that could reflect sluggish U.S. demand.

By early afternoon in Europe, benchmark crude for March delivery was down $1.50 at $73.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 76 cents to settle at $75.28 on Thursday.

With U.S. financial markets to be closed Monday for a holiday, analysts said the dollar's exchange rate and global stock markets would likely steer oil prices Friday.

A stronger dollar makes oil more expensive for investors holding other currencies and the greenback made gains on the euro Friday as the European Union dithered over how to aid Greece, beset by solvency problems.

"The heads of Europe have not been able to produce more than air to lift Greece ... and this is maintaining pressure on the euro," said Olivier Jakob of Petromatrix in Switzerland.

The euro was down at $1.3548, a nine-month low, in afternoon trading from $1.3686 late Thursday in New York.

The Energy Information Administration is scheduled to release its weekly U.S. crude inventory report later Friday. Earlier figures from the American Petroleum Institute showed crude stocks rose 7.2 million barrels last week, suggesting U.S. demand remains weak as the economy emerges from last year's recession.

"We would expect to see another large stock build in next week's report due to the snow disruptions" on the U.S. East Coast, Jakob said.

The Paris-based International Energy Agency said on Thursday that oil demand in North America has "virtually stalled," but that consumption in developing countries would help offset that and help boost overall global demand this year.

In other Nymex trading in March contracts, heating oil fell 2.92 cents to $1.9338 a gallon, and gasoline dropped 2.77 cents to $1.9080 a gallon. Natural gas dropped 4.3 cents to $5.353 per 1,000 cubic feet.

In London, Brent crude was down $1.27 at $72.85 on the ICE futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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