Oil prices fell 2 percent to below $67 a barrel on Tuesday after data showing a drop in U.S. consumer confidence spurred concerns about the economy and sent investors into safer havens.
An index of U.S. consumer confidence dropped to 46.6 in July from 49.3 in June, below analyst expectations of 49.0, recording its second consecutive decline as sentiment remained hampered by a difficult job market.
The decline in sentiment, as well as disappointing corporate earnings results, pushed stock markets <.N> lower, while the dollar and the yen gained as investors dumped riskier assets.
U.S. crude traded $1.41 lower at $66.97 a barrel at 12:36 p.m. EDT, while London Brent fell $1.17 to $69.64 a barrel.
The petroleum markets are backing off from the highs, seemingly prepared, along with the S&P 500, to at least take a break from the recent rally, said Tim Evans, analyst at Citi Futures Perspective in New York.
Optimism that a turnaround in the global economy could lift slumping fuel demand has supported crude prices this year. Crude fell from record highs near $150 a barrel last July to below $33 a barrel in December as the recession battered world consumption.
A Reuters poll of analysts forecast oil prices will average $73 a barrel next year, up from an average 2009 price prediction of $58.23 a barrel.
The chief executive of Saudi Aramco, the state oil company of OPEC kingpin Saudi Arabia, expressed confidence the global fall in oil demand was temporary and that consumption growth would eventually resume.
Leading U.S. refiner Valero Energy Corp
The wild swings in oil prices have pushed the U.S. Commodity Futures Trading Commission to consider setting position limits for crude and other finite commodities.
Officials from IntercontinentalExchange Inc
Investors were also awaiting U.S. weekly oil inventories data for which a Reuters poll forecast a 300,000-barrel drop in crude stocks and a 600,000-barrel fall in gasoline. Distillates stocks were projected to have risen by a hefty 1 million barrels.
The American Petroleum Institute will release its weekly report late Tuesday, while the U.S. Energy Information Administration data will be released on Wednesday.
(Reporting by Matthew Robinson, Robert Gibbons, and Gene Ramos in New York; Joe Brock in London; Editing by Walter Bagley)