Oil slips as eurozone woes stir caution

SINGAPORE: Oil prices slid in Asian trade on Thursday as caution returned to the markets on persistent concerns over the eurozone's finances, analysts said.

New York's main contract, light sweet crude for delivery in July slid 15 cents to 71.36 dollars a barrel while London's Brent North Sea crude for July shed nine cents to 71.65 dollars. World oil prices rallied on Wednesday, with sentiment lifted by rebounding stock markets and fresh data pointing to a sustained economic recovery in the key US energy market.

But caution returned on Thursday, curbing risk appetite amid ongoing worries over the eurozone debt crisis, said Ben Westmore, a minerals and energy economist with the National Australia Bank.

"Uncertainty around the euro situation continues to spook some investors and that has an impact on the US dollar, which is getting reflected in the oil prices," Melbourne-based Westmore told AFP. The euro saw a small gain against the dollar in Asian trade on Thursday, but analysts said the single European currency remained under pressure.

The euro advanced to 1.2203 dollars in Tokyo late morning trade after falling to 1.2175 in New York late Wednesday on fears of contagion from the debt crisis that has rocked the eurozone. It fetched 109.82 yen from 109.46. The dollar remained unchanged at 89.98 yen. A stronger US currency makes dollar-priced oil more expensive to holders of weaker units, denting demand and leading to lower prices.

Westmore said the stronger dollar tempered the impact of a report by the US Department of Energy on Wednesday which showed improving demand in the world's biggest energy consuming nation.

"In terms of fundamentals, the (US energy department) data showed a fall in both gasoline and distillate stocks which was a positive for the oil price," Westmore said. "But I think the euro concerns are probably offsetting that positive information."

The report showed an unexpected dip in US gasoline supplies last week, dropping 200,000 barrels. Distillate stocks, including diesel and heating oil, fell 300,000 barrels in the week ending May 21. Crude inventories, however, rose 2.4 million barrels against market expectations for a much smaller gain of 200,000 barrels.