Oil prices fell below $76 a barrel on Monday, extending the previous session's decline, on concern about the U.S. economic outlook after data showed consumer sentiment fell to a near one-year low.
News that the IMF and European Union has suspended a review of Hungary's funding program at the weekend has also ignited fresh eurozone jitters, as the country will not have access to remaining funds in its $25.1 billion loan package set up in 2008 until the review is concluded.
However, analysts said marginal slide in oil prices shows that crude was receiving ample support at above $74 a barrel, thanks to bullish inventory reports that showed large drawdowns in U.S. crude stocks over the past three weeks.
U.S. light, sweet crude for August delivery [US@CL.1 75.75 -0.26 (-0.34%) ] fell 22 cents to $75.75 a barrel by 0126 GMT. The contract settled down 61 cents at $76.01 a barrel on Friday, closing the week 8 cents lower than the previous week.
London Brent crude [GB@IB.1 75.2 -0.17 (-0.23%) ] retreated 5 cents to $75.23.
"The price decline looked mild considering the 2.5 percent slide in the Dow. The consumer sentiment report would have put the oil longs on the back foot," said Mark Pervan, chief of commodities research at Australia & New Zealand Bank.
"The stickier oil price move may be reflecting bullish inventory reports over the past three weeks showing larger than expected declines in U.S. crude supplies and a pickup in underlying demand."
Weak energy costs pushed U.S. consumer prices down for a third straight month in June while consumer sentiment dropped to a near one-year low in July, highlighting the sluggishness of the economic recovery.
In the eurozone, analysts at Informa Global Markets said uncertainty over Hungary's funding program has prompted a steep rise in the country's funding costs ahead of Friday's banks stress test results.
Asian stocks are set to drop on Monday, as poor data and disappointing results stoked fears over the state of the global economy, with Japan's markets closed for a holiday.
In a sign of reversing risk appetite, the U.S. dollar index [.DXY 82.665 0.18 (+0.22%) ] rose 0.17 percent against a basket of currencies, as the market volatility index [.VIX 26.25 1.11 (+4.42%) ] rose 4.4 percent on Friday.
Dismal consumer sentiment data and anemic revenues from GE and two big banks slammed U.S. stocks on Friday, driving down major indexes more than 2 percent. The slide in the S&P 500 was a decisive break of an 8 percent rise over the last two weeks as investors lost hope that strong earnings could overcome doubts about the economic outlook.
After poor economic data and an unexpected downturn in sentiment on quarterly earnings, Wall Street will face a tough time battling back from the latest sell-off this week, analysts said.
China Pipeline Blast, BP Well Seepage
Separately, Chinese firefighters extinguished a blaze that raged for over 15 hours after two oil pipelines exploded in the northeast port of Dalian, Xinhua news agency said on Saturday.
The fire threatened a tank farm in Dalian, a port which is home to part of China's strategic petroleum reserves, although it appears to have been contained without spreading to the tanks.
In the Gulf of Mexico, a top U.S. oil spill official on Sunday directed BP [BP 37.10 -1.82 (-4.68%) ] to submit a plan for reopening its capped Macondo well to flow into the ocean after engineers detected seepage on the ocean floor near the well.
On the weather front, two low pressure systems, one in the northern Gulf of Mexico and one just east of southern Nicaragua in the Caribbean Sea, had a low 10 percent chance to become the season's next tropical cyclone during the next 48 hours, the U.S. National Hurricane Center forecast Friday.