Oil futures retreated Thursday after the Bank of Japan's intervention in the currency markets strengthened the U.S. dollar.
Renewed worries about the health of the U.S. economy also weighed on prices after the government reported new claims for jobless benefits were nearly unchanged at a high level last week.
"The long-term bullish case for oil...that is based on emerging-market oil demand growth has been replaced by a focus on slowed economic growth within the advanced countries," said Jim Ritterbusch, head of the oil-trading advisory firm Ritterbusch and Associates, in a report.
Light, sweet crude for September delivery fell 53 cents, or 0.6%, to $91.40 a barrel on the New York Mercantile Exchange. The contract fell as low as $90.64 a barrel, its weakest level since June 28.
Brent crude on the ICE Futures Europe exchange traded down $1.09, or 1%, to $112.14 a barrel.
Futures pushed lower after Japan's central bank launched a campaign during Asian trading hours to weaken the yen. Bank officials argued that the intervention was necessary to tame speculation in Japanese currency, which threatened the country's fragile economic recovery.
The result was a sharp rise in the U.S. dollar, which typically weakens oil prices by making the dollar-denominated commodity more expensive for holders of other currencies. An index of the dollar's value against a basket of currencies was recently 1.4% higher, hitting its strongest level in two weeks.
Much of the oil market's focus, however, remains on the U.S., where a growing number of signs are suggesting the economic recovery is stalling. On Wednesday, the Labor Department reported the number of people claiming new jobless benefits fell by just 1,000 to a seasonally adjusted 400,000 in the week ended July 30.
The four-week moving average of new claims, considered a more reliable indicator of the labor market's health, fell by 6,750 to 407,750, the department said. Economists generally believe the economy is adding more jobs than it is losing when weekly claims fell below 400,000, which hasn't happened since early April.
The downbeat reading means traders are likely to focus closely on Friday's nonfarm payrolls report--the best watched indicator of U.S. employment levels--for additional insight on the economic health of the world's biggest crude consumer.
"Everybody's on the edge here," said Rich Ilczyszyn, senior market strategist at MF Global. "If the monthly unemployment number goes up or the jobs fall dramatically, gosh, this thing could really re-test your $90 (a barrel) price band."
Oil futures have retreated for five straight sessions amid worries that the U.S. recovery has stalled and demand for oil and fuel is weakening. Gasoline demand typically peaks this time of year, but a number of reports have suggested that drivers aren't hitting the road like they usually do in the summer. Gasoline demand for the four-week period ended July 29 fell 3.6% from a year ago, the Department of Energy reported Wednesday. That's the weakest July reading in nine years.
Although demand in emerging markets like China, the world's No. 2 oil consumer, have kept a floor under oil prices recently, analysts say additional signs of weakness in the U.S. could send the Nymex contract back below $90 a barrel for the first time since late June.
Front-month September reformulated gasoline blendstock, or RBOB, recently traded down 2.62 cents, or 0.9%, to $2.9051 a gallon. September heating oil declined 0.90 cent, or 0.3%, to $3.0100 a gallon.