Oil prices fell below $81 a barrel Wednesday after a report pointed to a larger-than-expected jump in U.S. crude inventories last week.
By early afternoon in Europe, benchmark crude for May delivery was down $1.19 to $80.72 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained 31 cents to settle at $81.91 a barrel on Tuesday.
Oil supplies in the U.S. have risen sharply in recent weeks, belying a slow but steady overall economic recovery and suggesting consumer demand remains weak.
Crude inventories jumped last week by 7.5 million barrels, the American Petroleum Institute said late Tuesday. Analysts had expected an increase of 1.7 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Inventories of gasoline and distillates fell, the API said.
The Energy Department's Energy Information Administration is scheduled to announce its supply report — the market benchmark — later Wednesday.
Some analysts said the correlation between the dollar's exchange rate and oil prices was weakening, with oil now linked more closely to equity markets.
The Nymex contract "is still lacking a momentum, stuck between wanting to trade on the S&P 500 sentiment and the fundamental realities of oil supply and demand," said Olivier Jakob of Petromatrix in Switzerland.
Nonetheless, the dollar continued to gain against the euro on Wednesday while oil prices fell.
A stronger dollar — which makes crude more expensive for investors in other currencies — has been seen as one of the factors pushing oil prices lower.
The euro was down to $1.3357 from $1.3488 late Tuesday in New York, while the British pound fell to $1.4949 from $1.5032 and the dollar rose to 91.33 Japanese yen from 90.43 yen.
"Crude oil prices are within a $75-$84 per barrel range this year, but a strengthening U.S. dollar seems to prevent the oil prices from surging further," said a report from Sucden Financial Research in London. "Furthermore, investors might remain cautious as the demand for crude oil remains weak and oil inventories are at record high levels."
In other Nymex trading in April contracts, heating oil fell 3.08 cents to $2.0710 a gallon, and gasoline slid 3.64 cents to $2.2264 a gallon. Natural gas dropped 5.4 cents to $4.076 per 1,000 cubic feet.
In London, Brent crude was down $1.21 at $79.49 on the ICE futures exchange.
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