Oil prices fell to near $96 a barrel on Wednesday while investors eyed Europe's continuing debt problems, weaker U.S. economic growth and fresh sanctions against Iran over its nuclear program.
By early afternoon in Europe, benchmark crude for January delivery was down $1.94 at $96.07 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.09 to settle at $98.01 in New York on Tuesday.
In London, Brent crude for January delivery was down $1.38 to $107.65 a barrel on the ICE Futures exchange.
There are increasing signs that the 17 countries using the euro are edging closer to a recession, which would cut Europe's demand for oil. The euro's slide against the stronger dollar also tends to push down oil prices by making crude more expensive for investors holding other currencies.
"We are seeing the eurozone situation weighing on sentiment, following a lackluster German Bund sale," said analysts at Sucden Financial in London in reference to Germany's federal bonds, generally considered a very safe investment.
In the United States, meanwhile, the Commerce Department said Tuesday that the U.S. economy grew 2 percent in the third quarter, less than the preliminary result of 2.5 percent it announced last month.
Investors also fretted that new international sanctions on Iran could reduce the flow of oil from the world's fourth biggest oil producer.
The latest U.S. crude supply data was mixed. The American Petroleum Institute said late Tuesday that crude inventories fell 5.6 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted crude levels would be unchanged.
However, inventories of gasoline jumped 5.4 million barrels last week while distillates dropped 900,000 barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.
Some analysts expect recovering crude output from Libya to boost global supplies and help push prices down further.
"Continued turmoil in the global economy, diminishing energy demand and the steady return of Libyan crude to the markets will apply downward pressure on energy pricing through the end of this year and the start of 2012," said Richard Soultanian of NUS Consulting in New Jersey.
In other Nymex trading, heating oil fell 4.6 cents to $3.0005 per gallon and gasoline futures slid 4.64 cents to $2.5186 per gallon. Natural gas dropped 3.6 cents at $3.379 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.
Copyright 2011 The Associated Press.