Continuing plunge, oil drops below $63 a barrel

Oil shed more than $1 to fall below $63 a barrel Tuesday, adding to a sharp drop over the last week on investor doubts about a global economic recovery.

Prices reached an eight-month high last week above $73, but quickly tapered off as dismal unemployment figures suggested that the U.S. and Europe would be slower to rebound out of recession than expected.

Benchmark crude for August delivery was up Tuesday but morning then turned into negative territory, apparently following the lead of Wall Street, where stock opened lower. A barrel was down $1.14 to $62.91 by afternoon in European electronic trading on the New York Mercantile Exchange. On Monday, the prices fell $2.68 to settle at $64.05.

Some analysts expect prices to rally again soon on signs that the worst of the economic slowdown is over.

"I think the market will look for some positive news and head back up toward $70," said Gerard Rigby, an energy analyst at Fuel First Consulting in Sydney. "There's been some profit taking in the last week, but I don't think there was a real change in sentiment."

Others suggested prices could fall further.

"The bulls, for the first time in months, now have to play defense," wrote trader and analyst Stephen Schork, in his Schork Report. "Failure in the oil markets to hold support here clears a path towards the $60 critical point of reference."

More attacks on Nigeria's oil infrastructure helped boost prices. Nigeria's main militant group said Monday it seized a chemical tanker with six foreign crew members aboard and attacked a second oil facility.

Investors will be looking to a weekly inventory report from the Energy Department's Energy Information Administration on Wednesday for signs that crude demand may be growing.

Analysts expect the EIA's crude inventory numbers to fall 3.2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

In other Nymex trading, gasoline for August delivery shed nearly 2 cents to sell at $1.72 a gallon, while heating oil plunged by close to 3 cents, fetching $1.60 a gallon. Natural gas for August delivery lost more than 3 cents at $3.45 per 1,000 cubic feet.

In London, Brent prices slid by 70 cents, selling at $63.35 a barrel on the ICE Futures exchange.