Oil slips below $84 as traders eye US demand

Oil prices slipped below $84 a barrel Tuesday, extending declines from the previous day as the dollar strengthened against the euro and traders looked for signs U.S. crude demand is catching up with a growing economy.

By early afternoon in Europe, benchmark crude for May delivery was down 93 cents to $83.27 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 92 cents to settle at $84.20 on Monday.

Oil prices have jumped from $69 a barrel in February as investors anticipated an improving U.S. economy would boost crude demand. But oil inventories have remained high, suggesting consumption hasn't bounced back yet.

The Energy Department is scheduled to announce its weekly supply data Wednesday.

There's been an "overwhelming psychological trend toward higher prices, based on economic news and higher equities," said Cameron Hanover in a report.

"Because the economic news has been so good recently -- so good that it has eclipsed the market's recent, poor fundamentals -- investors decided to take profits."

A stronger dollar -- boosted by the continued uncertainty over the bailout funds for Greece -- also weighed on oil prices by making crude more expensive for investors holding other currencies.

"In the short-term, if the dollar's run resumes, we will continue to see headwinds generated for commodity markets," said Edward Meir at MF Global in New York. "In crude's case, we also think the rapid climb in prices over the last several weeks has discounted the impact of improving demand prospects, so short of any fresh geopolitical strife, prices are rather vulnerable at current levels."

In European trading Tuesday, the euro fell to $1.3317 compared with $1.3383 late Monday in New York, .

"We remain in an environment where there are no clear-cut announcements on the salvation of Greece, which for now still looks like a play of 'now you see it, now you don't' and that will continue to rock" the euro/dollar exchange rate, said analyst Olivier Jakob of Petromatrix in Switzerland.

In other Nymex trading in May contracts, heating oil fell 1.06 cents to $2.2265 a gallon, and gasoline dropped 1.23 cents to $2.3286 a gallon. Natural gas slipped 5.2 cents to $4.210 per 1,000 cubic feet.

In London, Brent crude was down 70 cents at $86.13 on the ICE futures exchange.