Oil falls to near $73 amid signs of weak demand

By PABLO GORONDI Associated Press Writer

(AP) - Oil prices fell to near $73 a barrel Friday amid expectations a slower economic recovery in debt-saddled Europe will weigh on crude demand and rising U.S. crude stocks.

By early afternoon in Europe, benchmark crude for June delivery was down $1.21 to $73.19 a barrel in electronic trading on the New York Mercantile Exchange. The June contract dropped $1.25 to settle at $74.40.

Crude prices have fallen about 15 percent from early last week as the dollar gained amid a debt crisis in Europe. A stronger dollar makes oil more expensive for investors with other currencies.

The euro fell Friday to $1.2469 from $1.2519 on Thursday, while the British pound was down to $1.4586 from $1.4609.

Oil traders have also been eyeing equity markets as an overall barometer of investor sentiment, and the Dow Jones industrial average fell 1.1 percent Thursday. Most Asian and European stock indices also dropped Friday.

"The price of oil is currently fighting a losing battle against the dollar and the equities markets," said Mike Sander of Sander Capital.

Investors are concerned that fiscal austerity measures in countries such as Spain, Portugal and Greece will undermine economic growth and crude consumption.

"It looks like the euro zone economy is going to slow by quite a bit, not helping the overall global economy, nor that of crude oil demand," Sander said.

Rising crude stocks in Cushing, Oklahoma, the delivery point of the Nymex contract, have also been named among the reasons for lower prices.

"The specter of large crude oil inventories seems to be weighing on markets much more than before, and has been instrumental in pressuring prices," said Edward Meir, senior commodity analyst at MF Global in New York. "This should come as no surprise - with OPEC's compliance record as poor as it has been for so many months now, it stands to reason that supply should be outpacing demand and ending up in stocks, the improvement in U.S. offtake notwithstanding."

In other Nymex trading in June contracts, heating oil fell 2.39 cents to $2.1080 a gallon, and gasoline fell 2.8 cents to $2.1671 a gallon. Natural gas was down 4.9 cents at $4.29 per 1,000 cubic feet.

In London, June Brent crude, which expires Friday, was down $2.09 to $78.02 on the ICE futures exchange.

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Associated Press writer Alex Kennedy in Singapore contributed to this report.