Oil slid on Thursday for a third straight day on mounting fears that a slowdown in the global economic recovery would cut commodities demand.
Japan's Nikkei average slid to a 13-month low on Thursday after U.S. stocks erased the year's gains in the broadest selloff in a month-and-a-half on Wednesday.
The dollar snapped recent weakness and posted its biggest daily gain in nearly two years on Wednesday which hit oil prices as concerns about the U.S. and global economies triggered risk aversion.
A stronger dollar makes oil more expensive for holders of other currencies.
The rally (of oil prices) all the way to $83 was mostly because of the weak dollar, said Clarence Chu, trader at Hudson Capital.
London Brent crude fell more than $1 in early Thursday trade while U.S. crude extended its decline following a 3 percent fall on Wednesday, its biggest drop in six weeks.
By 12:21 a.m. EDT, Brent crude was at $76.80 a barrel, down 84 cents, while U.S. crude for September delivery fell 71 cents to $77.31 a barrel.
The RJ/CRB index .CRB of 19 commodities, a global benchmark for the asset sector, dropped 1.27 percent, or 3.45 points, to 268.83, its lowest level since July 30.
WEAK U.S. DEMAND
Summer gasoline demand in the U.S. was unusually weak as official data showed on Wednesday a larger-than-expected build in stocks in the week to August 6.
The U.S. trade gap widened 18.8 percent in June, suggesting its second-quarter economic growth was weaker than previously thought.
This reinforced fears about the sustainability of the global economic recovery after the U.S. Federal Reserve issued a downbeat outlook while trade data from China showed a gradual slowdown.
From the data, it all indicates that the economic recovery is slowing down because of the end of economic stimulus, Chu said.
He added that the 3 million barrels drawdown in U.S. crude stocks last week was supposed to be bullish, but the weak economic outlook has turned the trend bearish.
However, prices are technically supported around $75 a barrel, he said.
Let's see if the support will hold, Chu said.
(Reporting by Florence Tan; Editing by Ed Lane)