By PABLO GORONDI
Associated Press Writer
Oil prices fell below $76 a barrel Tuesday after investor euphoria over a $1 trillion European debt bailout evaporated and the euro weakened.
By early afternoon in Europe, benchmark crude for June delivery was down $1.06 to $75.74 a barrel in electronic trading on the New York Mercantile Exchange. The June contract rose $1.69 to settle at $76.80 on Monday.
"Crude oil's price recovery was short lived," said a report by Commerzbank in Frankfurt, noting Tuesday's decline. "This suggests a change of mood on the oil market. Prices are thus set to retreat further."
Oil is down from an 18-month high of $87.15 a barrel early last week as the European debt crisis undermined investor confidence in the euro. Commodities priced in dollars, such as oil, become more expensive for investors holding euros as the U.S. currency strengthens.
Crude rebounded Monday after the European Union Commission and International Monetary Fund pledged a loan package of euro750 billion ($975 billion) to defend the common currency, but closed off its high of $78.51 as the euro gave back some of its gains.
The euro fell to $1.2688 on Tuesday from $1.2790 on Monday while the British pound fell to $1.4773 from $1.4881.
Someanalysts expect the bailout to temporarily stabilize European bond prices but eventually weaken the euro and weigh on oil prices.
"While the eurozone support plan appears sufficient to forgo any contagion for now, additional weakening in the euro should eventually spill over" into oil prices, Ritterbusch and Associates said in a report.
A monthly report from the Organization of Petroleum Exporting Countries released Tuesday showed only minor changes in expected 2010 global oil demand.
Global demand is seen reaching 85.38 million barrels a day, a rise of 1.12 percent - or 950,000 barrels a day - over the 2009 figures, OPEC said.
"Although the recent upward revision to GDP must be matched with oil demand, the increase in oil demand will be less," OPEC said, due to factors including "turbulence" in the transportation sector - which accounts for nearly half of the world's oil use - and the recovery of global industry, another substantial oil consumer.
With the dollar gaining and most stock markets in Asia and Europe falling, OPEC's forecast only added to the negative mood.
"The bottom line, from an oil perspective, is that the petroleum fundamentals are bearish on their own and there is no real reason for prices to be even where they are now - without help from equities or currencies," said a report from U.S. energy consultancy Cameron Hanover. "There is still a great deal to sort out in this market before it will be clear where we are going next."
In other Nymex trading in June contracts, heating oil fell 1.35 cents to $2.1067 a gallon, and gasoline slid 1.35 cent to $2.1591 a gallon. Natural gas lost 0.7 cent to $4.163 per 1,000 cubic feet.
In London, Brent crude was down 77 cents to $79.35 on the ICE futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.