* Europe's debt crisis raises worries on global recovery
* Coming up: U.S. API oil inventory statistics; 20:30 GMT
* For a technical view of crude oil: []
By Alejandro Barbajosa
SINGAPORE, May 25 (Reuters) - Oil fell below $70 a barrel
on Tuesday on growing concern that Europe's debt crisis would
derail the global economic recovery, prompting investors to
sell riskier assets in a flight to dollar safety.
The greenback gained about 0.6 percent against a basket of
currencies <.DXY> on Tuesday, while Japan's Nikkei average fell
to its lowest in more than five months following a steep drop
in Wall Street. []
"The market got ahead of itself, building in a lot of
anticipation that the economy and oil demand would recover,"
said Tony Nunan, a risk manager with Tokyo-based Mitsubishi
Corp., referring to U.S. crude's 19-month high above $87 hit in
early May.
"The fact that the dollar is strengthening is a sign of
risk aversion and deleveraging. People are moving away from
crude oil," Nunan said, adding that Fibonacci chart analysis
showed prices would head towards $66.24.
U.S. crude for July delivery <CLc1> fell as much as 89
cents to $69.32 a barrel and was down 69 cents at $69.52 at
0258 GMT. ICE Brent <LCOc1> crude slid 62 cents to $70.55.
Europe's fumbling response to a debt crisis in Greece and
bulging deficits in other euro zone countries has unnerved
markets over the past six weeks, and the central bank takeover
of a small Spanish lender at the weekend stoked fears of a
wider meltdown. []
The crisis has overshadowed positive economic indicators
showing that emerging and OECD nations are returning to growth
after the worst recession of the post-war era.
"A lot of the economic indicators are positive, but the
reality is that we have to admit that oil supply is keeping
ahead of demand," Nunan said.
"Demand is recovering, but OPEC has been slipping steadily
over its production target."
Most estimates suggest production from the Organization of
the Petroleum Exporting Countries has been rising since early
2009 as higher oil prices have encouraged members to relax
adherence to output cuts announced in December 2008.
OPEC's compliance with the 4.2 million bpd of promised
cutbacks has fallen to around 51 percent, according to Reuters
estimates. []
OPEC is very worried about the fall in oil prices and is
watching developments in the market closely, but it is too
early to say if the producer group needs to take any action,
Libya's top oil official said on Monday. []
A preliminary Reuters survey showed analysts were divided
over the direction of U.S. oil inventories last week. The poll
of six analysts called for an average drawdown of 100,000
barrels, but the group was evenly divided on how inventories
shifted. []
Distillate stockpiles including heating oil and diesel
probably climbed 300,000 barrels, the poll showed, while views
were mixed on whether gasoline supplies shrank or grew.
The analysts issued their forecasts ahead of weekly
inventory data from industry group American Petroleum
Institute, due on Tuesday at 2030 GMT, and government
statistics from the Energy Information Administration scheduled
at 1430 GMT on Wednesday.
(Editing by Michael Urquhart)
