Oil slides to near $82 on Greece debt woes

Oil prices extended losses, sliding to near $82 a barrel Wednesday amid concerns over the global economic recovery and expectations of rising crude inventories in the U.S.

By early afternoon in Europe, benchmark crude for May delivery was down 20 cents to $82.24 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.76 to settle at $82.44 on Tuesday.

Crude's slide followed falls in Asian and European stock markets, which have been hit by the eurozone debt crisis after Standard and Poor's downgraded the debt of Greece and Portugal. Concerns are mounting that the problems could damage the global economic recovery and hurt oil demand.

"The eurozone debt crisis is driving markets down. It looks like $80 a barrel is a strong floor for crude in the near term," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

Crude's bearishness is also partly due to expectations that the U.S. government's inventory report due later Wednesday will show a further rise in crude oil and gasoline stocks, he said. A report by the American Petroleum Institute late Tuesday showed gains in crude and gasoline inventories, piling pressure on the market, he said.

"Besides the negative market factors for all commodities such as the stronger U.S. dollar, rising risk aversion and falling equity markets, the weak fundamental data have also contributed to this price slump," said a report from Commerzbank in Frankfurt.

Traders are also waiting to see the outcome of the Federal Reserve's two-day meeting Wednesday.

The Fed is expected to leave interest rates at record lows but the question is whether it will take steps to reduce the unprecedented amount of money it pumped into the economy to fight the Great Recession. The economy is getting better, but unemployment remains near double digits and is expected to stay high all this year.

Any Fed move also could drive the dollar higher and that too can affect oil prices. A stronger dollar makes crude more expensive for investors holding other currencies.

"Commodities markets are currently vulnerable to a huge downside correction. This is because, despite the oversupply, commodity prices have continued to climb and thus blended out the risks," the Commerzbank report said.

In other Nymex trading in May contracts, heating oil fell 0.73 cent to $2.2230 a gallon, and gasoline dropped 0.76 cent to $2.3192 a gallon. Natural gas rose 0.40 cent to $4.220 per 1,000 cubic feet.

In London, Brent crude fell 30 cents to $85.48 on the ICE Futures exchange.