Oil falls to near $72 in Europe on economic fears

Oil prices slumped to near $72 a barrel Tuesday as the dollar strengthened against the euro and regional markets fell amid new concerns about the pace of the global economic recovery.

By early afternoon in Europe, benchmark crude for October delivery was down 81 cents to $72.29 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 72 cents to settle at $73.10 on Monday, after hitting a high of $74.88 earlier in the day.

Asian and European stock markets were mostly in the red Tuesday after Wall Street stumbled overnight.

"Since the beginning of this month, about every 1 percent drop in the stock market has equated to about a 2.5-3 percent decline in oil prices and we look for this pattern to continue," said Ritterbusch and Associates.

It expects oil prices to slide to $71-$72 ahead of the release of U.S. housing industry figures and oil inventory data this week.

Analysts are forecasting a build of 1.1 million barrels in U.S. crude oil stocks and a draw of 875,000 barrels in gasoline stocks, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The American Petroleum Institute will release its inventory data later Tuesday while the Energy Department's Energy Information Administration reports its weekly supply data -- the market benchmark -- on Wednesday.

Oil prices have fallen more than $9 a barrel since the beginning of August.

Mike Sander of Sander Capital Advisors said the weakness in the oil price showed investors' uncertainty over the strength of the global economy, particularly the U.S. He said American banks are slumping with lower-than-expected earnings and this doesn't bode well for the economy.

"The U.S. housing market is looking weak as well as the unemployment picture. Seasonally, Labor Day weekend is coming in two weeks which signals the end of the summer driving season, so consumption could take a hit in the coming month," he said.

But China and other emerging nations are still growing, as is their consumption of oil, he said.

A stronger dollar also dragged on crude prices, making the commodity more expensive for investors holding other currencies.

The euro was down to $1.2617 Tuesday from $1.2682 late Monday in New York, while the British pound retreated to $1.5414 from $1.5535.

Edward Meir of MF Global in New York said that the Nymex contract falling to $70 would be a "fairer value" for the contract, "given the backdrop of slowing growth that seems to be spreading much of the globe."

In other Nymex trading in September contracts, heating oil fell 1.38 cents to $1.9416 a gallon and gasoline dropped 1.65 cents to $1.8645 a gallon. Natural gas lost 1.1 cents to 4.055 per 1,000 cubic feet.

In London, benchmark crude for October delivery was down 72 cents at $72.90 a barrel on the ICE Futures exchange.