Oil prices fell below $78 a barrel Tuesday amid the strengthening dollar and continued doubts about global demand for crude, AP reported.
By early afternoon in Europe, benchmark crude for February delivery was down 23 cents to $77.77 a barrel in electronic trading on the New York Mercantile Exchange.
There was no floor trading on the Nymex on Monday due to the Martin Luther King holiday. The February contract closed at $78 a barrel on Friday.
Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore, said oil prices were likely to stay in a range as investors waited for cues from fourth quarter corporate earnings reports in the U.S.
So far, earnings have been mixed, with better-than-expected results from the likes of Intel Corp. offset by disappointments elsewhere, most notably Alcoa Inc.
Banks will be in the spotlight especially after U.S. stocks fell 1 percent on Friday - the Dow Jones industrial average suffered its worst day of the year so far - as JPMorgan Chase & Co. offered a cautious earnings guidance even though it reported a fairly strong set of results.
The dollar's gains against the euro and the British pound weighed on dollar-priced commodities like oil, making them more expensive for investors holding those currencies.
The 16-nation euro fell to $1.4293 from $1.4369 on Monday, while the British pound was down to $1.6324 from $1.6335 and the dollar was off just slightly to 90.96 Japanese yen from with 90.99 yen Monday.
London's Sucden Research said economic data from China on Thursday, including figures on fourth-quarter GDP and December industrial production, "could provide further support to the energy markets."
Oil prices were also kept in check by a report from the Vienna-based Organization of Petroleum Exporting Countries, which showed that crude oil inventories remain at high levels, "enough to handle any unexpected increase in crude oil demand this winter," Sucden noted.
OPEC also concluded that "inventories remain high enough to cope with any sudden jump in winter demand."
In other Nymex trading in February contracts, heating oil fell 2.09 cents to $2.0251 a gallon while gasoline was down 0.96 cent at $2.0358 a gallon. Natural gas futures shed 15.4 cents to $5.537 per 1,000 cubic feet.
In London, Brent crude for March delivery fell 56 cents to $76.54 a barrel on the ICE Futures exchange.