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US Light crude oil futures for July delivery traded at $72.08 a barrel at 0611 GMT on the NYMEX, while in London, Brent crude oil futures for July delivery fell 46 cents to $72.25 a barrel on the ICE Futures Exchange.

The dollar index, which measures the US currency against a basket of six others, advanced 0.2% to 86.74, although the dollar was down 0.8% against the British pound at $1.466.

A stronger dollar versus the euro and other currencies weighs on oil prices as it makes the commodity much more expensive to buy for holders of other currencies. The euro is trading near a four-year low against the dollar, under pressure after the downgrade of Spain’s sovereign debt and the European Central Bank’s estimate of bank losses.

Asian stock markets opened lower on Wednesday which will probably have a negative effect on oil prices, yesterday the Dow Jones closed over one percent lower at 10,024.02.

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US Light crude oil futures for July delivery was at $73.65 a barrel at midday Singapore time on the NYMEX.

Crude supplies fell more than expected last week, dropping by 1.4 million barrels, the American Petroleum Institute said late Wednesday. Analysts had expected an increase of 1.0 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Meanwhile, the Dow Jones industrial average rose 2.2 percent Wednesday and all major Asian stock markets gained in early trading on Thursday.

“The driver for oil prices at the moment is economic recovery and there’s some evidence of it in the US and UK, but overall the concern is the eurozone debt crisis,” said CMC Markets analyst Michael Hewson.

“Jittery oil trading is here to stay for now as we continue to track the broader markets and swings in global risk sentiment,” said VTB Capital analyst Andrey Kryuchenkov.

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Light crude oil futures for July delivery was at $74.67 midday Singapore time on Friday on the NYMEX.

Oil prices advanced 2.4 percent after the US Department of Energy said US crude oil supplies fell 1.9 million barrels to 363.2 million last week, while crude oil inventories were forecast to be unchanged, according to the Bloomberg News survey.

US stockpiles were forecast to drop by 500,000 barrels, according to analysts surveyed by Bloomberg News.

However, stockpiles of WTI crude oil at Cushing, Oklahoma, where New York traded WTI oil is delivered, rose to 37.9 million barrels, the second-highest level since the US Energy Department started keeping records at the storage hub in 2004.

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US Light sweet crude oil futures for July delivery closed trading at $71.51 a barrel on the NYMEX, while in London, Brent crude oil futures ended at $71.71 a barrel on the ICE Futures Exchange.

The latest US jobs data showed that the private sector created only 41,000 jobs however most analysts had expected 226,000 private payrolls to be added.

“The US payroll figures did manage to surprise the oil market on the negative side,” said Sucden research analyst Myrto Sokou in London.

The data sent stock markets and oil prices sharply lower in trading and the Dow Jones finished the week under the 10,000 mark and down over three percent.

Meanwhile, the US dollar surged to its highest level against the euro in more than four years which tends to have a negative effect on oil prices. The euro sank as low as $1.1956, its weakest level since it bought $1.1920 in March 2006 and well below the $1.2182 it bought in New York late Thursday.

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Brent crude oil futures ended at $71.71 a barrel on the ICE Futures Exchange.

The ICE Dollar Index, which tracks the greenback against the trade weighted basket of currencies, was at 88.225 from 87.240. The index tracked to its highest level since March 2009 as investors turned to the perceived safety of the US dollar.

“The next level for the euro I’ll look at is the October 2005 low at $1.18,” said Bruce Zaro, chief technical strategist at Delta Global Advisors. “Below that, you’ve got $1.09 in August of 2003. The trend has been confirmed negative on the euro and positive on the dollar.”

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US Light crude oil futures for July delivery fell to $69.51 a barrel on the NYMEX, while in London, Brent crude oil futures for July delivery dropped over two percent, to $70.50 a barrel, on the ICE Futures Exchange.

Oil prices were poised for their biggest two-day decline in a month as the euro dropped against the dollar and the MSCI Asia Pacific Index tumbled by the most in 14 months amid concern of losses in Hungary.

The euro fell to $1.1922 from $1.1967 in New York and touched $1.1877, the lowest level since March 2006, on concern Europe’s debt crisis will slow global growth. The MSCI Asia Pacific Index retreated 3.3 percent to 109.70 as of 1:20 p.m. in Tokyo, set for its biggest decline since March 30, 2009. The gauge has slumped 15 percent from its high this year on April 15.

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US Light crude oil futures for July rose to $71.89 a barrel midday Singapore time on the NYMEX.

Investors mulled data from the US Commerce Department which showed new homes sales rose a bigger than expected 14.8% in April to a seasonally adjusted rate of 504,000, up from 439,000 the month before.

The July contract for WTI oil futures received an additional bounce when the US Energy Information Administration reported that oil inventories at Cushing, Okla. dropped by 300,000 barrels in the week ended May 21st 2010, the first drop at the storage hub since March.

Cushing is the delivery point for the physical barrels underpinning the NYMEX WTI oil contract, but inventories have begun to approach storage limits in recent weeks. As crude oil supplies hit record levels, traders became uncertain whether there would be space for more barrels, creating a strong incentive to sell futures contracts for next month delivery. Earlier this month, the now-expired June contracted traded at a $4.96 a barrel discount to July oil prices.

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If crude oil prices drop to $65 a barrel then some OPEC member countries may consider the price is too cheap, Kuwait’s oil minister said, declining to comment on any action that the group might take to support prices.

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US Light crude oil futures rose to $70.69 a barrel at 12:30pm Singapore time on the NYMEX, while in London, Brent crude oil futures for July settlement rose to $71.95 a barrel on the ICE Futures Exchange.

“There has been a significant decline in oil prices over the past couple of weeks so there might be some traders who think that oil has been oversold and are looking to buy in at these levels,” said Toby Hassall, chief commodities analyst at CWA Global Markets Pty Ltd.

“Oil could remain as the casualty of negative sentiments in the short term, but it should rebound when the panic subsides because we’re still seeing strong growth in Asia and the U.S. economy is also slowly recovering.”

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