* U.S. crude hits lowest level since September
* Weekly U.S. jobless claims rise unexpectedly
* Euro near four-year lows versus dollar
(Updates prices, adds data, repeats without change to detach
from previous story)
By Emma Farge
LONDON, May 20 (Reuters) - Oil fell below $68 a barrel on
Thursday to its lowest in nearly eight months, under pressure
from concern that the euro zone debt crisis will cut both risk
appetite and demand for oil.
Worries that the Greek fiscal problems could spill over to
other economies has knocked oil prices down by around $20 from
the $87.15 a barrel peak in early May.
Oil extended early losses on Thursday as U.S. stocks dropped
following a slew of data that raised doubts about the speed of
economic recovery in the world's top oil consumer.
Weekly initial U.S. jobless claims rose unexpectedly and an
April index of U.S. leading economic indicators marked its first
decline in over a year. [] []
U.S. crude <CLc1> for June delivery fell $2.14 to $67.73 a
barrel by 1428 GMT in volatile trade on the day of its expiry,
falling below the near eight-month low hit the previous day.
The June contract has fallen so far in eight out of the last
ten trading sessions.
The July contract was down $2.90 at $69.58 a barrel in the
more volatile trade that usually characterises more distant
futures contracts relative to the benchmark front month.
ICE Brent futures <LCOc1> were down $3.33 at $70.36 a barrel
by the same time.
"The fiscal crisis in Europe has been an eye-opener for
markets. Even though we have a recovery, it's clear that it will
be slow and painful and it's the same for oil demand," said
Christophe Barret, oil analyst at Credit Agricole CIB.
The euro traded near four-year lows against the dollar on
Thursday as uncertainty over unity in the euro zone prevailed
following Germany's solitary move to ban naked short-selling of
certain bonds, stocks and credit protection on Wednesday.
[] <EUR=>
Oil prices tend to fall when the euro falls against the
greenback as this makes dollar-denominated commodities more
expensive for holders of the single European currency.
The German ban has also curbed buying appetite for
commodities such as oil as investors fret other eurozone members
will follow suit, which is exacerbating the price slide,
analysts said.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a chart on the returning oil/dollar correlation with
Europe risk, click:
http://graphics.thomsonreuters.com/gfx/RSW_20101905125817.jpg
For a chart showing the performance of commodities including
oil so far this year, click:
http://graphics.thomsonreuters.com/gfx/CMD_CRB200510.gif
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
BELOW RANGE
Oil prices this week have fallen below the $70-$80 a barrel
range that many members of the Organization of the Petroleum
Exporting Countries (OPEC) have said is fair for both producers
and consumers.
But OPEC officials have stopped short of calling for any
immediate steps to prop up the market. []
Some analysts attribute the weakness of U.S. crude partly to
a regional supply glut at the Cushing delivery point for West
Texas Intermediate (WTI) where stocks are at a record high of
37.9 million barrels.
The sell-off in the alternative global oil benchmark ICE
Brent has been less pronounced than on WTI and the spread
between the two contracts was around $3 on Thursday, with Brent
at a premium.
Oil prices briefly rallied on Wednesday after U.S. weekly
inventory data showed a smaller-than-expected 200,000 barrel
rise in crude stocks.
The data also showed a surprise decline in distillates and a
smaller than forecast drop in gasoline, stirring hopes that fuel
demand in the number one oil consumer is improving. []
Oil demand is historically weakest in the second quarter
between the northern hemisphere winter heating oil season and
the summer gasoline season.
(Additional reporting by Judy Hua in Singapore; editing by
Amanda Cooper)
