US oil futures fell on Tuesday, ending at a seven-month low as Europe's debt problems kept feeding risk aversion among investors, pulling the euro and oil back from early gains. US crude for June delivery fell 67 cents, or 0.96 percent, to settle at $69.41 a barrel, the lowest settlement since crude closed at $66.71 on September 29, 2009.
London Brent crude for July fell 67 cents to settle at $74.43 a barrel, ending down a fourth consecutive day. Crude jumped in early trading to $72.52, then fell to a session low of $68.91 - off 20.9 percent from their 19-month high of $87.15 hit on May 3. "The euro fell back toward its previous four-year low (vs the dollar) and the financial equities were hit some. The concerns about Europe's debt situation are still there," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut.
The euro extended losses versus the US dollar to hit a four-year low below $1.22 in afternoon trading. The dollar also strengthened against a basket of currencies, rallying as investors sought safety in the dollar and the yen. The euro came under heavy pressure after news the German government plans to ban naked short-selling from midnight in the country's 10 most important financial institutions.
US equities also reversed on concerns over Europe, which also dragged export-dependent technology shares. Bank stocks also weighed, as investors fretted over the implications of a federal financial regulation proposal. A final vote on the Wall Street regulatory overhaul is expected. Key senators reached a compromise on the balance of power between state and federal officials. US heating oil futures ended lower, but gasoline futures ended unchanged after a report from MasterCard Advisors SpendingPulse said US retail gasoline demand rose 0.8 percent last week from the previous week.
Crude stockpiles have risen in the last eight weeks to a record 37 million barrels, at the US crude oil contract's West Texas Intermediate benchmark delivery point in Cushing, Oklahoma. This has pushed the front-month US crude contract down relative to later futures contracts and Brent. On Monday open interest for the front-month June crude contract stood at 138,574, near the record for a front-month contract. The contract expires on Thursday.
Some trading sources said the contango, the higher prices for contracts further out, could be an incentive for traders to try to take delivery. But other sources noted that the lack of storage available may increase volatility as too many traders try to exit positions just ahead of expiration. Analysts surveyed by Reuters forecast total US crude oil stockpiles rose last week as imports rebounded. Ahead of weekly inventory reports from industry group American Petroleum Institute on Tuesday and the US Energy Information Administration on Wednesday, crude inventories were expected to be up 700,000 barrels from the previous week.
Angola's oil minister said earlier on Tuesday that the Organisation of the Petroleum Exporting Countries would need to hold an extraordinary meeting if oil prices fell sharply again. Libya's top energy official, Shokri Ghanem, earlier on Tuesday told Reuters that Opec will watch the market before deciding on any action.