Oil fell toward $74 a barrel on Monday as low demand for crude oil in the wake of the economic downturn continued to pressure prices, outweighing last week's strong U.S. job report.
NYMEX crude for January delivery fell $1.34 to $74.13 a barrel by 2:20 p.m. Brent crude dipped 89 cents to $76.63 a barrel.
Despite the good jobs numbers, crude had some significant drags on it in terms of supplies, refinery utilization and overall economic activity. That's what is continuing to weigh, said John Kilduff, partner, Round Earth Capital.
Oil and product inventories have climbed in the world's top oil consumer as an economic downturn has depressed demand.
U.S. crude oil stockpiles rose again last week, according to a preliminary Reuters poll of analysts on Monday.
On Friday, data showing that U.S. jobs fell much less than expected had boosted hopes for economic recovery, but on Monday U.S. Federal Reserve Chairman Ben Bernanke warned that the unemployment rate could remain elevated for some time.
U.S. stocks rose slightly after Bernanke said that the U.S. economy was improving, but that its recovery is still fragile. <.N>
Oil markets have looked to macroeconomic factors this year for signs of a recovery from the recession that could support oil demand.
The U.S. dollar drifted lower after Bernanke's comments.
Weakness in the greenback typically discourages investor interest in dollar-denominated commodities.
Saudi Arabia's oil minister Ali al-Naimi on Saturday described the current oil price as stable and perfect for consuming and producing nations alike at around $75 a barrel.
With no output changes expected at OPEC's Luanda meeting later this month, brimming stocks on land and an estimated 165 million barrels of crude oil and refined products in floating storage are sending investors further out along the oil futures curve in search of trading profits.
For graphic showing steepening of the forward curve, click:
(Additional reporting by Chris Baldwin in London; Nick Trevelyan in Singapore, editing by Marguerita Choy)