AnalysisOil continued its drop for the second day after yesterday's sharp drop as global concerns and rising dollar sapped demand on oil.

Crude oil for July delivery slipped near 5%, the lowest settlement since late February, after abysmal US manufacturing report and escalating European woes eclipsed the improvement in the EIA report.  

On Wednesday trading session, prices reached a low of $94.04 a barrel, falling from a high of $99.92 to close at $95.35 compared with the day's opening level of $99.41.

Oil was boosted temporarily after the EIA report which showed that U.S commercial crude oil inventories decreased by 3.4 million barrels from the previous week, whereas total motor gasoline inventories increased by 0.6 million barrels and distillate fuel inventories decreased by 0.1 million barrels last week and are above the upper limit of the average range for this time of year.

However, worries regarding global recovery this year pushed oil down, especially after drop in empire manufacturing to -7.79 compared with the prior 11.88, whereas inflation climbed to the highest level in nearly three years in the month of May, adding to concerns after the weak data released recently from the world's no.1 oil consumer.

In Europe, concerns aggravated after ECB policy makers said the euro-zone surveillance package should be doubled which increased skeptics that debt-laden countries will continue to suffer, while a reshuffle of Greek Prime Minister raised doubts the new austerity measures may be affected, thereby impacting the international bailout.    

Eyes today will be on US jobless claims and housing data to get further clues about the health of the economy.

In the FOREX market, the dollar continued its rise against a basket of major currencies, as depicted by the dollar index which inclined to 75.75 after opening at 75.54, taking advantage of the escalating European debt woes which pushed the euro to three-week low against the greenback.

The strong dollar is negatively affecting dollar-denominated commodities, led by oil; meanehile, oil is trading at $95.09 after recording a high of $95.53 and a low of $94.82.