Oil prices fell to near $68 a barrel Wednesday, extending losses to an eight-month low as mixed U.S. crude supply figures failed to stem a two week sell-off.
By early afternoon in Europe, benchmark crude for June delivery was down $1.23 to $68.18 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 54 cents to settle at $69.41 on Tuesday.
Oil has plunged more than 20 percent from $87.15 a barrel on May 3 on investor concern that efforts to contain Europe's debt crisis could fail and deep government spending cuts will hurt economic growth and oil demand.
Oil inventory data from the American Petroleum Institute late Tuesday was mixed. Crude and distillate supplies fell while gasoline stocks rose. Supplies at the key storage terminal in Cushing, Oklahoma, rose to a fresh record high.
The Energy Department's Energy Information Administration announces its weekly inventory data report -- the market benchmark -- later Wednesday.
"The recent selling pressure that has gripped the oil market continues to hinge on factors external to oil-specific fundamental developments," Barclays Capital said in a report. "Market perceptions over possible developments of the sovereign debt crisis are set to remain an important pricing factor."
Traders are closely watching the euro since oil becomes more expensive for investors holding the European currency as the U.S. dollar strengthens.
The euro rose slightly to $1.2201 on Wednesday after dropping to a fresh four-year low of $1.2146 earlier in the session.
"As long as the euro continues to sink like a rock in water, the price of oil will remain on the defensive," Mike Sander of Sander Capital Advisors said.
Analysts also noted comments by Jose Botelho de Vasconcelos, oil minister of Angola, one of the members of the Organization of Petroleum Exporting Countries, who said OPEC would need to hold an extraordinary meeting if prices continued to fall.
"As crude oil prices breached the $70 per barrel area, it is likely that OPEC will have to discuss the level of production quotas in order to support crude oil prices in the near term," said an energy report from Sucden Financial in London.
Others, however, suggested OPEC could struggle to influence the market.
"Such calls for measures to support prices are not credible ... as long as OPEC members continue to produce 2 million barrels per day more crude oil than the quotas stipulate," said a report from Commerzbank in Frankfurt. "As oil prices are currently being driven by the financial market and not by supply and demand, OPEC's scope for bearing any influence is limited."
"Furthermore, at $73 a barrel, the OPEC basket price is currently still within the range of $70-80 which OPEC members regard as necessary to keep investments flowing into new projects."
Olivier Jakob of Petromatrix in Switzerland said that tighter compliance with output quotas could boost oil prices, "but given the strength of the dollar, it would only suffocate a bit more the non-dollar economies and will be negative on global oil demand."
In other Nymex trading in June contracts, heating oil fell 1.38 cents to $1.9477 a gallon, and gasoline dropped 2.28 cents to $2.0203 a gallon. Natural gas was down 2.7 cents to $4.315 per 1,000 cubic feet.
In London, Brent crude's July contact was down 77 cents to $73.66 on the ICE futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.