Oil prices tumbled below $83 a barrel Tuesday on a stronger dollar and a falling stock market as investors worried about the ongoing European financial crisis.
After setting an 18-month high during trading Monday, benchmark crude for June delivery fell $3.45, or 4 percent, to settle at $82.74 on the New York Mercantile Exchange.
The decline came as stocks dropped sharply around the world over concerns that European countries would fail to approve a $144 billion bailout package for Greece. That could make it more difficult to rescue a larger country like Spain, which also has financial problems.
The Dow Jones industrial average fell about 230 points shortly before the close, erasing a 143-point gain on Monday.
"The big drop in the Dow, the stock market generally, is probably the biggest driver of this big sell-off on oil," Jim Ritterbusch of Ritterbusch and Associates said.
"This broadbased increase of risk appetite that was pushing both commodities and equities markets higher for a long time is going through a sizable correction here today," he said.
The euro sank to a 13-month low against the dollar grew. Since oil is priced in dollars, a stronger dollar makes it less attractive to overseas buyers.
Oil prices also are being pushed down by growing crude inventories, which may have gained an additional 1.5 million barrels last week, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The Energy Department's Energy Information Administration is scheduled to release last week's supply data Wednesday.
"The economy has so far ignored signs that higher oil prices are making it that much harder for the recovery to maintain its pace," Cameron Hanover consultancy said in a report.
Retail gasoline prices rose 0.9 cent overnight to $2.904 a gallon, according to AAA, Wright Express and Oil Price Information Service.
Many analysts and the Energy Department predict pump prices will top $3 per gallon later this spring before falling.
In other Nymex trading in June contracts, heating oil fell 8.56 cents to settle at $2.2595 a gallon, and gasoline lost 11.29 cents to settle at $2.3222 a gallon. Natural gas added 1.3 cents at $4.013 per 1,000 cubic feet.
In London, Brent crude was down $3.27 to settle at $85.67 on the ICE futures exchange.
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