Oil prices sank into negative territory Tuesday as dealers took profits from a rally earlier in the day to 10-month highs.
U.S. crude oil slipped 52 cents to $73.85 a barrel, down from a peak of $75. Brent crude dropped 94 cents to $73.32 a barrel.
It looks like crude tested the $75 level and failed, said Tom Bentz, a trader with BNP Paribas.
Oil prices shot up in the early hours of trading after a U.S. report showed consumer confidence rose more than expected in August -- another in a string of rosy economic indicators that could foretell the end of the recession.
Wall Street stock indexes climbed to their highest levels since October <.N>, when the losses in the market steepened into a plunge under the weight of the global financial crisis.
Share prices Tuesday were also supported by news U.S. President Barack Obama renominated Ben Bernanke as chairman of the U.S. Federal Reserve.
Oil prices, which have been tracking equities markets closely in recent months, are likely to hold around the current $73 a barrel level next year, according to a Reuters survey of more than 30 analysts.
The analysts raised their consensus forecast for the fifth straight month, on expectations the strength of economic improvement and higher fuel demand would support strong prices.
The oil market's focus will shift later to weekly U.S. oil inventory data.
Analysts in a Reuters survey forecast a 900,000 barrel drop in U.S. crude inventories. Gasoline inventories were forecast to fall, while middle distillate stocks, including heating oil, were seen increasing.
Last week, U.S. crude stocks posted a big fall as refiners boosted operations and imports dropped sharply to hit their lowest level in 11 months, U.S. Energy Information Administration data showed.
Data from the American Petroleum Institute will be released at 2030 GMT (4:30 p.m. EDT) on Tuesday, and the equivalent U.S. government data is due out on Wednesday.
(Additional reporting by Ramthan Hussain in Singapore and Richard Valdmanis in New York; editing by Jim Marshall)