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 Benchmark crude for June delivery was down 66 cents to $79.31 a barrel at late afternoon Singapore time after dropping to as low as $78.87 in electronic trading on the New York Mercantile Exchange. The June contract lost $2.77 to settle at $79.97 on Wednesday.
Crude has dropped 10 percent from an 18-month high of $87.15 a barrel earlier this week as an escalating debt crisis in Europe undermined confidence in the euro. Commodities priced in dollars, such as oil, become more expensive for investors holding euros as the U.S. currency strengthens.
The euro fell to $1.2763 on Thursday from $1.2823 the previous day while the dollar fell to 93.45 yen.
"The market is realizing the problem in Europe is not easy to fix," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "If the euro collapses, that's really going to push crude down."
Signs of tepid U.S. crude demand also weighed on oil prices. The Energy Information Administration said Wednesday that crude inventories rose by 2.8 million barrels last week while analysts had expected an increase of only 1.5 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Inventories of gasoline and distillates also rose.
In other Nymex trading in June contracts, heating oil fell 1 cent to $2.1745 a gallon, and gasoline slid 0.89 cent to $2.2115 a gallon. Natural gas fell 1.3 cents to $3.978 per 1,000 cubic feet.
In London, Brent crude was down 38 cents at $82.23 on the ICE futures exchange.
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