Oil price declines almost 10% since end of March despite high of $87 in May.
Oil edged lower on Wednesday, heading for its first quarterly drop since 2008 as risk aversion over Europe's debt crisis neutralised the effect of rising demand in the United States and China, the world's top two consumers.
The dollar's rally continued on Wednesday, further eroding oil purchasing power for emerging economies, while Japan's Nikkei slumped more than 2 percent to a seven-month low, tracking Tuesday's sell-off in Wall Street.
Crude pared losses after the United States late on Tuesday said Hurricane Alex had forced the shutdown of a quarter of US oil production in the Gulf of Mexico and after an industry report showed the nation's inventories fell more than expected last week.
US crude for August tumbled as much as 61 cents to $75.33 a barrel and was down 23 cents at $75.71 by 6am UAE time. ICE Brent crude slid 38 cents to $75.06.
Prices have declined almost 10 percent from the end of March, the first quarterly drop since the October-December period in 2008. Still, in early May US crude hit a 19-month high above $87.
"I am very bearish on Europe," said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
"The market just wants to get higher and then there is bad news and it comes down again. The premium for Alex has evaporated, so I wouldn't be surprised if prices come back down. It could get really close to the $75 support level."
Banks must repay 442 billion euros ($545.5 billion) to the European Central Bank on Thursday, leaving a potential liquidity shortfall in the financial system of over 100 billion euros.
The yen and the Swiss franc held on to broad gains on Wednesday as nervous investors rushed to unwind leveraged carry trades on the back of a significant deterioration in risk appetite, while the dollar was up versus a basket of currencies.
Investors fled the US stock market on Tuesday and the S&P 500 tumbled to its lowest level in eight months in a sell-off triggered by a wave of rising alarm over the global economic outlook.
Tropical Storm Alex was upgraded to a hurricane in the Gulf of Mexico late on Tuesday but was moving north of Mexican oil rigs and far southwest of US fields, easing concerns about a supply disruption.
Precautionary evacuations and closures interrupted 395,878 barrels per day (bpd), or 24.7 percent of US oil output in the Gulf of Mexico, the US Bureau of Ocean Energy Management, Regulation and Enforcement said late on Tuesday.
"They will only shut down for a few days, but obviously there will be an impact on next week's inventory figures," Chu said.
"It's the hurricane season, but I don't think there is any potential threat just yet. Damage to oil rigs could change fundamentals dramatically."
US crude inventories fell 3.4 million barrels in the week to June 25, industry group the American Petroleum Institute said on Tuesday, outstripping analyst expectations of a 900,000-barrel draw in the latest Reuters poll.
Gasoline stocks fell 908,000 barrels, versus analysts' expectations of a 500,000-barrel draw, but distillates, including heating oil and diesel, rose 4 million barrels, above forecasts for a 800,000-barrel gain.
The US Energy Information Administration will publish more closely-watched government statistics on inventories on Wednesday at 6.30pm UAE time.
The United States will accept offers from a dozen countries and international agencies to help contain and clean up the BP oil spill in the Gulf of Mexico, the State Department said on Tuesday.