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 due to the country's rising debt.
Fears that the rising cost of borrowing would spark an increase in U.S. debt triggered a selloff in equities markets, with most Asian stocks opening lower on Thursday.
U.S. crude oil for July delivery fell 56 cents to $62.89 a barrel by 0200 GMT. The contract settled $1.00 higher at $63.45 on Wednesday.
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.
Oil prices initially rose on Wednesday and touched $63.82, the highest level since mid-November, bolstered by bullish comments from Saudi Arabia and data that showed U.S. home sales picked up in April, a positive sign for a sector at the root of the global economic meltdown.
But a shift in investors' concerns to mounting U.S. debt after the government issues bonds to pay for bailouts of companies and other stimulus spending forced oil to pare gains.
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 in Vienna, said oil prices would continue to rise and that the global economy was now strong enough to support $75-$80 oil.
The minister 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.
(Editing by Ben Tan)