Oil slid below $70 today ahead of US fuel data expected to show crude stocks at a nine-year high and rising petrol inventories in the world's top consumer, coupled with losses in other commodity markets.
Investors are showing signs of steering clear of higher-risk markets due to troubles with US mortgage securities and concerns over the rising cost of borrowing.
London Brent crude, currently seen as a better indicator of the global market than US oil, was down 40 cents at $69.77 earlier, after falling $1.19 yesterday.
US crude was down 54 cents at $67.23.
"The main driver of the market now is the US inventory data for both crude and gasoline," said Tetsu Emori, chief commodities strategist at Japan's Mitsui Bussan Futures. Analysts estimate US crude inventories, already at the highest since May 22nd, 1998, rose a further 1.2 million barrels last week.
Petrol inventories were seen up by 1.2 million barrels. Petrol supplies have risen since US refineries returned from maintenance, with utilisation rates projected to rise by 1.0 percentage point to 88.6 percent of capacity.
However, analysts said the longer-term view remained bullish. Venezuela confirmed yesterday that US majors Exxon Mobil and ConocoPhillips would leave giant oil projects after they were nationalised, which US Energy Secretary Sam Bodman worried could lead to lower US imports from the Latin American country.
OPEC's president Mohammed al-Hamli reiterated the group's view that there is no need to raise production now, saying on Tuesday that the main factors keeping prices high are geopolitical tensions and US refinery bottlenecks. Supplies to the world's largest consumer are also expected to be hit by Mexico's declining Cantarell field, where output fell 0.8 per cent in May to 1.579 million barrels per day (bpd).
Mexico is a top-three supplier to the US and the world's fifth largest producer. And in Brazil, oil workers in five states voted yesterday to strike as part of a five-day national strike threatened to start after July 5th. A strike would disrupt output at state firm Petrobras, which pumps about 1.8 million bpd.