Asian stocks slid and the euro struggled near a two-week low on Wednesday on concerns over banks' funding conditions in Europe and the pace of the global recovery.
Crude pared losses after the United States late on Tuesday said Hurricane Alex had forced the shutdown of a quarter of U.S. oil production in the Gulf of Mexico and after an industry report showed the nation's inventories fell more than expected last week.
U.S. crude for August tumbled as much as 61 cents to $75.33 a barrel and was down 12 cents at $75.82 by 0438 GMT. ICE Brent crude slid 29 cents to $75.15.
Prices have declined almost 10 percent from the end of March, the first quarterly drop since the October-December period in 2008. A stronger dollar this quarter eroded oil purchasing power for emerging economies. However, in early May U.S. crude hit a 19-month high above $87.
For a graphic comparing daily percentage changes for crude and the dollar over the past 10 quarters: here
I am very bearish on Europe, said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
The market just wants to get higher and then there is bad news and it comes down again. The premium for Alex has evaporated, so I wouldn't be surprised if prices come back down. It could get really close to the $75 support level.
Banks must repay 442 billion euros ($545.5 billion) to the European Central Bank on Thursday, leaving a potential liquidity shortfall in the financial system of over 100 billion euros.
The S&P 500 tumbled to its lowest level in eight months on Tuesday in a sell-off triggered by a wave of rising alarm over the global economic outlook. Risk aversion intensified after a report showed a slump in U.S. consumer confidence.
Japan's Nikkei slumped more than 2 percent to a seven-month low on Wednesday. .T
ALEX AND INVENTORIES
Tropical Storm Alex was upgraded to a hurricane in the Gulf of Mexico late on Tuesday but was moving north of Mexican oil rigs and far southwest of U.S. fields, easing concerns about a supply disruption.
Precautionary evacuations and closures interrupted 395,878 barrels per day (bpd), or 24.7 percent of U.S. oil output in the Gulf of Mexico, the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement said late on Tuesday.
They will only shut down for a few days, but obviously there will be an impact on next week's inventory figures, Chu said.
It's the hurricane season, but I don't think there is any potential threat just yet. Damage to oil rigs could change fundamentals dramatically.
U.S. crude inventories fell 3.4 million barrels in the week to June 25, industry group the American Petroleum Institute said on Tuesday, outstripping analyst expectations of a 900,000-barrel draw in the latest Reuters poll.
Gasoline stocks fell 908,000 barrels, versus analysts' expectations of a 500,000-barrel draw, but distillates, including heating oil and diesel, rose 4 million barrels, above forecasts for a 800,000-barrel gain.
The U.S. Energy Information Administration will publish more closely-watched government statistics on inventories and consumption on Wednesday at 1430 GMT.
China is leading oil demand growth among emerging economies, while consumption in the United States started to rebound in the second quarter after 1- years of decline.
U.S. oil demand in April was 45,000 barrels per day more than previously estimated, rising 439,000 bpd from a year earlier, the EIA said on Tuesday.
The approach of Alex, the first Atlantic hurricane of 2010, halted some clean-up efforts from BP Plc's (BP.L) (BP.N) Gulf of Mexico oil spill on Tuesday and delayed plans to capture more of the gushing crude.
The U.S. will accept offers from a dozen countries and international agencies to help contain and clean up the spill, the State Department said on Tuesday.
(Editing by Clarence Fernandez, Himani Sarkar)