Oil prices fell below $63 a barrel on Thursday, snapping three sessions of gains, as investor sentiment soured on worries that a potential recovery in the United States might be delayed because of the country's rising debt.
U.S. equities fell on Wednesday as rising yields on U.S. government debt fueled concern that businesses and consumers could face higher borrowing costs, which could hamper an economic recovery.
U.S. crude oil for July delivery fell 56 cents to $62.89 a barrel by 12:07 a.m. EDT. The contract settled $1.00 higher at $63.45 on Wednesday, after having touched $63.82 -- the highest level since mid-November.
London Brent crude shed 50 cents to $62.00.
Oil is tracking movements in the equities markets and there might be some concerns that perhaps the U.S. economy hasn't really bottomed out and a recovery would take longer than expected, said Ben Westmore, a commodities analyst at the National Australia Bank.
Concerns about the debt burden facing countries trying to spend their way out of the economic downturn spooked investors on Thursday, despite upbeat comments from U.S. President Barack Obama that America's economy was past the worst of the crisis.
Still, oil prices are hovering around a six-month high and broke cleanly above the key 200-day moving average on Wednesday for the first time in more than eight months, supporting the view oil has a new price floor at $60 a barrel.
Saudi Oil Minister Ali al-Naimi, speaking on the eve of a meeting of the Organization of Petroleum Exporting Countries (OPEC) in Vienna, said oil prices would continue to rise and that the global economy was now strong enough to support $75-$80 oil.
Naimi said OPEC, which has already agreed to cut 4.2 million barrels per day of oil from the market in a bid to shore up prices battered by recession, did not need to change its output policy when it meets later today in Vienna.
With production quotas expected to remain unchanged, we will look to the meeting communique to get a sense of OPEC's stance on preferred price levels and strategies for dealing with the massive global stock overhang, JP Morgan said in a research note on Wednesday.
Expectations that U.S. crude oil inventories are expected to post another drop this week, this time by some 700,000 barrels, are also lending support to prices.
Data from the American Petroleum Institute has been delayed by one day until Wednesday afternoon due to the U.S. Memorial Day holiday at the start of this week, while the EIA's weekly report will be released Thursday.