Oil below $75 as stock markets fall, dollar gains

[January 26, 2010]  BERLIN (AP) -- Oil prices slid well below $75 a barrel Tuesday, weighed by weaker stock markets in Europe and Asia and a stronger dollar.

By early afternoon in Europe, benchmark crude for March delivery was down 75 cents to $74.51 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it fell as low as $74.14. On Monday, the contract rose 72 cents to settle at $75.26.

Concerns over China's recent moves to control bank lending clouded Asian stock markets, which were mostly down Tuesday.

The prospect of slowing growth in China has raised risk aversion in equity markets and pushed investors to buy the dollar, seen as a safe haven, said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

Trading sentiment was dampened by China's move to impose higher reserve ratios for selected banks, said JBC Energy in Vienna.

"It is feared that tighter monetary policy in the world's second largest oil consumer could hamper the global economic recovery," JBC Energy said in a report.

Analysts also said the combination of ample supplies and uncertain demand made it hard to justify recent oil prices above $80 a barrel.

"Oil stock levels and excess capacity ... are still much above the levels of previous years, yet oil is being priced at the equivalent of the boom years when no available spare capacity was available to the system," said Olivier Jakob of Petromatrix in Switzerland.

Oil prices were also under pressure from a stronger dollar, which makes crude more expensive for investors holding other currencies.

On Tuesday, the euro was down to $1.4079 from $1.4158 late Monday in New York, while The British pound fell to $1.6108 from $1.6239.

More earnings and economic reports in the U.S. during the week will provide clues on how the economy is faring, and determine the direction of oil prices, analysts said.

In other Nymex trading in February contracts, heating oil eased 1.46 cents to $1.9512 a gallon while gasoline lost 1.73 cents to $1.9835 a gallon. February natural gas futures fell 11.5 cents to $5.607 per 1,000 cubic feet.

In London, Brent crude for March delivery was down 63 cents to $73.06 a barrel on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.

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