Oil fell sharply to below 67 dollars in Asian trade Tuesday amid conflicting signals about the prospects of an early rebound for the struggling global economy.
A decline in world stock markets further weighed on the oil market, while a stronger US dollar prompted traders to lock in profits from a recent rally that saw prices climb past 73 dollars, analysts said.
In afternoon trade, New York's main futures contract, light sweet crude for delivery in August, tumbled 85 cents to 66.65 dollars a barrel. The July contract settled at 66.93 dollars as it expired Monday.
Brent North Sea crude for August delivery dropped 83 cents to 66.15 dollars.
Traders said concerns that a global economic recovery may come later than expected were dampening sentiment, with the sharp fall in US stocks overnight a grim reminder of the hurdles ahead.
Asian stocks retreated Tuesday, led by Japanese shares which closed 2.82 percent down following a wide sell-off on Wall Street.
"The main driver of oil has gone beyond traditional measures of just supply and demand and has metamorphisised into a macroeconomic force that at times measures the state of the global recovery and other times becomes a safe haven from the dollar or inflation or systemic risk," said Phil Flynn of Alaron Trading.
The World Bank Monday slashed its forecast for developing nations' economies, estimating growth at 1.2 percent this year while warning more measures were needed for a recovery to take hold.
"General concerns about the economy persist with the World Bank warning that the prospects for the global economy remain unusually uncertain," said Mike Fitzpatrick of MF Global.
Investors also took profit after the dollar strengthened.
A stronger US currency makes dollar-priced oil more expensive for buyers holding weaker currencies, which in turn tends to dampen demand and pull the market lower.
Oil prices plunged from record highs of more than 147 dollars in July 2008 to around 32 dollars in December as the economic slowdown crushed demand for energy -- but the market has since rebounded.
