U.S. crude oil fell back below $70 a barrel on Monday, giving up an earlier gain on persistent worries that Europe's debt crisis would slow the global economic recovery.

The euro fell broadly, pulling back from a short-covering rally after the Spanish central bank's takeover of a savings bank underlined structural problems facing fiscally fragile euro zone states. European stocks slipped.

What we're seeing is more of a reaction to the currencies, said Rob Montefusco, a commodity broker at Sucden Financial. The fundamentals of oil haven't suddenly changed. There's still plenty of oil about.

U.S. crude was down 35 cents at $69.69 a barrel by 1052 GMT. Brent crude fell 67 cents at $71.01.

Oil in New York has fallen steeply from a 2010 high of $87.15 reached in early May. It touched a low of $64.24 on May 20 -- the weakest for a nearby contract since July 2009.

The euro was on the back foot after the Bank of Spain said on Saturday it had taken over the running of CajaSur following the failure of its planned merger with another regional lender.

The move highlighted the weakness of the banking sectors of some euro zone members, which are already suffering from fiscal problems and struggling to bring down their budget deficits.

Oil markets remain well supplied with the Organization of the Petroleum Exporting Countries pumping about 2 million barrels per day (bpd) above agreed output targets.

Crude stocks at the delivery hub for U.S. futures contracts in Cushing, Oklahoma are at a record high.

While oil is just below the $70-$80 range many in OPEC have said they prefer, OPEC officials have stopped short of calling for any steps to prop up prices and the group is not scheduled to meet until October.

Some in the oil market expect prices to recover given the demand coming from emerging economies.

World oil demand is expected to rise by 1.62 million barrels per day (bpd) in 2010, led by emerging economies such as China, according to the International Energy Agency. Global consumption declined in 2009.

I think the weakness last week was a bit overdone when you look at the incredibly strong demand data from China, said Christopher Bellew, a broker at Bache Commodities. It probably won't stay down here too long.

(Reporting by Alex Lawler and Fayen Wong in Perth; Editing by William Hardy)