Oil edged lower on Wednesday, heading for its first quarterly drop since 2008 as risk aversion over Europe's debt crisis neutralised the effect of rising demand in the United States and China, the world's top two consumers.
The dollar's rally continued on Wednesday, further eroding oil purchasing power for emerging economies, while Japan's Nikkei slumped more than 2 percent to a seven-month low, tracking Tuesday's sell-off in Wall Street.
Crude pared losses after the United States late on Tuesday said Hurricane Alex had forced the shutdown of a quarter of US oil production in the Gulf of Mexico and after an industry report showed the nation's inventories fell more than expected last week.
US crude for August tumbled as much as 61 cents to USD 75.33 a barrel and was down 23 cents at USD 75.71 by 0257 GMT. ICE Brent crude slid 38 cents to USD 75.06.
Prices have declined almost 10% from the end of March, the first quarterly drop since the October-December period in 2008. Still, in early May US crude hit a 19-month high above USD 87.
"I am very bearish on Europe," said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
"The market just wants to get higher and then there is bad news and it comes down again. The premium for Alex has evaporated, so I wouldn't be surprised if prices come back down. It could get really close to the USD 75 support level."
