June 12 (Bloomberg) -- Oil fell from a seven-month high after a record plunge in European industrial production prompted speculation that bets on an economic recovery are premature. Futures declined more than $1 a barrel after a report showed that output in the euro region dropped 21.6 percent from a year earlier. The dollar strengthened, undermining the attractiveness of commodities as an alternative investment. OPEC said members raised production in May for a second month, straying further from quotas. “Crude had such a powerful rally that it was vulnerable to a correction,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “The negative economic numbers from the euro zone got it going. The dollar got stronger on the news from Europe, which has hit crude.” Crude oil for July delivery fell 54 cents, or 0.7 percent, to $72.14 a barrel at 10:45 a.m. on the New York Mercantile Exchange. Futures dropped as much as $1.88, or 2.6 percent, to $70.80. Oil has gained 62 percent this year. Yesterday, the contract rose $1.35, or 1.9 percent, to $72.68 a barrel, the highest settlement since Oct. 20. Prices, which are up 5.4 percent sine June 5, are heading for a fourth straight weekly gain. “We’ve already taken out yesterday’s low of $71.32 and now I’m waiting to see if we can break through the $70.50 region,” Bentz said. “If we can break through that area, we will head toward $70 on a retracement.” European Output Production in the 16-member euro region plunged the most since the data series started in 1986, the European Union’s statistics office in Luxembourg said today. Economists expected a 19.8 percent decline, according to a Bloomberg News survey. From March, output declined 1.9 percent. The dollar strengthened 0.9 percent to $1.3975 per euro, from $1.4108 yesterday. The dollar may briefly weaken above $1.50 against the euro before September as central banks sell the currency, Thomas Stolper, an analyst for Goldman Sachs Group Inc. in London said on June 11. “Money is coming out from under those mattresses,” Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington, said today on Bloomberg Radio. “A falling dollar can induce people to put money into commodities.” Oil is poised to reach $75 a barrel after rising above $73 yesterday, according to technical analysis by Newedge USA LLC. The next resistance level that oil will meet is at $75, then $78.25, said Veronique Lashinski, a senior research analyst for Newedge in Chicago. Prices last topped $78.25 on Oct. 15 when they touched $79.17. Pointing Higher “It’s still pointing higher,” Lashinski said in an interview yesterday. “The weekly continuation chart is very strong.” The 11 members of the Organization of Petroleum Exporting Countries bound by production targets, all except Iraq, pumped 25.903 million barrels a day in May, an increase of 118,800 barrels a day from April, the Vienna-based group said in its monthly oil report today, citing secondary sources that include estimates from analysts and news organizations. OPEC has implemented 75 percent of planned output cuts of 4.2 million barrels a day, compared with 77 percent in April, based on data in the report. “The market has excessively priced in the idea that a demand recovery is imminent,” said Eugen Weinberg, an analyst with Commerzbank AG in Frankfurt. “Upbeat sentiment might drive prices higher in the short term, but later in the summer fundamentals will play a larger role and a massive price correction is likely.” Brent crude for July delivery fell 83 cents, or 1.2 percent, to $70.96 a barrel. Yesterday, the contract rose 99 cents, or 1.4 percent, to $71.79 on London’s ICE Futures Europe exchange, the highest settlement since Oct. 20.

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