Oil prices fell more than 1 percent on Tuesday in choppy trading as weak economic data fueled concerns about demand that have contributed to crude's 15 percent decline so far in May.
Oil felt pressure from news that U.S. housing starts and building permits fell in April and factory output slumped.
U.S. gasoline futures slid sharply early, then pared losses after tumbling nearly 5 percent the previous session on the receding threat to refineries from flooding in the Mississippi River delta.
Brent crude for July delivery dropped $1.60 to $109.24 a barrel by 12:50 a.m. EDT (1650 GMT), falling back from an earlier $111.82 intraday peak.
U.S. crude for June delivery slipped $1.30 to $96.07 a barrel, having fallen as low as $95.02 on the day that June crude options expire on the New York Mercantile Exchange.
Traders and analysts noted open interest concentrated on puts at the June crude option $95 strike price.
Crude trading volumes were around the 30-day average, according to Reuters data.
With the housing numbers coming in soft and industrial production coming in (near) flat, there is some concern there will be a double dip in the housing slump and on a broader scale for the economy as a whole, said Rob Kurzatkowski, futures analyst with OptionsXpress in Chicago.
We're seeing further liquidation on the precious metals, and that's offering some outside pressure on the oil market as well.
Copper fell as the weak U.S. economic data weighed on the industrial metal. A stronger dollar pressured gold..
Concerns about the European debt crisis also weighed on oil, as investors watched to see if peripheral economies such as Greece and Portugal will be able to meet their obligations.
The euro seesawed against the dollar but remained vulnerable on concerns Greece might restructure its massive debt. The dollar index <.DXY>, measuring it against a basket of currencies, strengthened, helped by the yen's weakness.
A stronger dollar can pressure dollar-denominated oil prices by raising the price for consumers using other currencies and pulling investment from commodities to less risky markets.
Rising water levels on the Mississippi River looked less likely to hurt eight refineries in Louisiana after U.S. Army engineers began opening flood gates.
People who bought on the threat refiners would be affected by the floods sold yesterday and we're seeing this again today, said Tom Knight, trader at Truman Arnold in Texarkana, Texas.
The gasoline crack spread, or profit margin for refiners, pulled back about $3 to just above $26 a barrel, after pushing above $40 on May 10.
Investors also anticipated weekly oil inventory reports on U.S. stockpiles, starting with the industry group American Petroleum Institute's data due at 4:30 p.m. EDT (2030 GMT) on Tuesday,
U.S. crude inventories are expected to have risen for the fourth straight week as higher imports outpaced refinery demand, a preliminary Reuters poll of analysts showed on Monday.
Gasoline and distillate stockpiles were also expected to be higher.
(Additional reporting by Gene Ramos in New York, Emma Farge and Simon Falush in London and Florence Tan in Singapore; Editing by David Gregorio)