Oil prices fell more than $1 to below $63 a barrel on Tuesday as growing uncertainty over an economic recovery spurred investor risk aversion.
A member of U.S. President Barack Obama's economic advisory panel said the world's top oil consumer should plan to possibly provide a second round of stimulus funds to prop up the economy, implying that recovery is still far off.
U.S. crude futures settled down $1.12 at $62.93 a barrel as investors sought safer havens. London Brent crude fell 82 cents to settle at $63.23 a barrel.
The worries are that the pace of the economic recovery hasn't materialized the way that people who plunged into the commodity markets thought, and now they are running for the exits, said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. The question is how far they will run.
Safe-haven currencies such as the dollar and the yen gained on the concerns about a potential turnaround to the global economic crisis, while U.S. stocks fell. <.N>
Crude prices have dropped from $73 a barrel in late June on worries a rebound in global fuel demand may be far off, after economic optimism helped lift prices from lows under $33 struck in December.
The U.S. Energy Information Administration raised its outlook for global oil demand by 170,000 barrels per day (bpd) in a report released on Tuesday.
There has been stronger economic activity in Asia than was previously anticipated, and the current forecast reflects higher expected oil consumption in that region, the EIA said.
Surging demand from China and other developing economies launched oil and other commodities on a six-year rally that sent crude to a record high near $150 a barrel last year, before the economic crisis hit demand.
Weekly U.S. inventory data is expected to show a fall in crude oil stockpiles and a build in gasoline and distillate stocks in the week to July 3, the build up to the long U.S. Independence Day holiday weekend when summer gasoline demand typically peaks.
Data from the American Petroleum Institute is scheduled to be released later Tuesday, with the EIA's weekly inventory report due out on Wednesday.
Crude has found limited support from OPEC member Nigeria, where militants have launched at least four attacks against oil installations in the past 10 days, helping to underpin prices on Tuesday.
(Reporting by Matthew Robinson, Gene Ramos, and Robert Gibbons in New York and Joe Brock and Ikuko Kao in London; Editing by Christian Wiessner)