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NEW YORK: Oil prices tumbled to three-month lows on Friday at the end of a volatile week in which the market was hit by stubborn eurozone economic concerns and a strong dollar.
New York's main contract, light sweet crude for June delivery, shed 2.79 dollars to close at 71.61 dollars a barrel.
The price had tumbled to 70.83 dollars, the lowest level since February, before recouping some of its losses.
In London, Brent North Sea crude for June shed 2.93 cents to 77.18 dollars a barrel.
"Stockpiles are getting bigger, demand is not returning as hoped," said Mike Fitzpatrick of MF Global, expressing concern about the next steps in Europe's debt crisis.
Countries like Greece, Portugal and Spain, he said, "have to choose between two bad alternatives: accept austerity or be punished in market, with crushing borrowing costs."
"Either scenario will lead to more contraction of economic activity."
Earlier in the week, prices had been forced down when the US Department of Energy revealed that American crude stockpiles had risen by 1.9 million barrels last week, more than double the amount forecast by analysts.
And crude stockpiles at the key Cushing, Oklahoma terminal, jumped to a record 37 million barrels from 36.2 million the prior week.
"Crude oil prices came under selling pressure this week, following record oil inventories at Cushing and amid general uncertain and fragile economic conditions in the eurozone," said Sucden analyst Myrto Sokou.
"It seems that global crude oil demand has not rebounded yet to the extent that global oil supply has, and this is possibly going to weigh on crude oil prices in the near term."
The oil market had begun the week on a bright note, soaring on Monday after a one-trillion-dollar EU-IMF eurozone rescue plan eased market concerns over the eurozone financial crisis.
Investors reacted positively to the European Union and International Monetary Fund aid package, worth 750 billion euros, to resolve the debt and budget deficit situation in Europe.
However, prices have since fallen as market enthusiasm waned for the massive bailout plan, while concern grew about higher Chinese inflation that could slow global economic growth.
Oil also took a major hit from the strong US unit, which makes dollar-priced crude more expensive for buyers using weaker currencies and therefore tends to dampen demand and prices.
The euro tumbled under 1.24 dollars on Friday as the single currency was plagued by concerns about debt and deficits in the eurozone.
Elsewhere this week, the Paris-based International Energy Agency (IEA) cut its projection for global oil demand this year in the face of public finance pressures in Europe that could drown recovery "in an ocean of public debt."
Worldwide oil demand is projected at 86.4 million barrels a day this year, up 1.9 percent from 2009 but 220,000 barrels a day below the previous IEA estimate.
"The economic recovery is at risk of drowning in an ocean of public debt," the IEA said in its monthly report, adding that "downside risks remain a clear and present danger".
While current attention is riveted on Greece, "other large economies - and not only in Europe - face the increasingly pressing challenge of achieving an orderly fiscal consolidation in the next few months without jeopardising long-term growth."
Oil prices had already collapsed by more than 10 percent in value last week as the market was rocked by contagion fears about the Greek debt crisis, a stronger dollar and sliding global stock markets. - AFP/de
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