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Prices dip below $70; BP spill not slowing drop in crude.

Oil prices on Monday fell to their lowest point so far this year and are now down about 20 percent in just two weeks as investors worry about the ripple effects of a debt crisis in Europe.

There is fear in both equities and commodities market that economic weakness in Europe could spread to the U.S. and hurt the global recovery. A drop in the euro has hurt the case for investing in oil.

The turnaround in oil prices has been sudden — crude hit an 18-month high of $87.15 a barrel during trading on May 3. It settled Monday at $70.08 after dipping as low as $69.27. The plunge is similar to the fall from mid-January to early February when prices fell from $84.95 to $69.50 per barrel.

The big difference now is that the latest decline occurred at the onset of summer driving season. That’s good news for U.S. motorists, who should soon see sharply reduced pricesat the pump. Gas has fallen just 2 percent nationwide since peaking earlier this month at $2.929 per gallon. But that pace should pick up heading into the Memorial Day weekend and the summer driving season.

Prices in many markets in the U.S. will be $2.75 per gallon or lower by next week, said Tom Kloza of the Oil Price Information Service.

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Crude oil prices have fallen over four percent in late trading on Friday, hit by weaker than expected US payrolls data and a stronger US dollar, with the Dow Jones closing under the 10,000 mark.

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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Page added on May 22, 2010

Crude oil prices have ended this week’s trading around the $70 mark and have seen about a 20 percent loss since hitting an 18 month market high of $87.15 on May 3rd 2010.

US Light crude oil futures settled at $70.04 on the NYMEX, while in London, Brent crude oil futures closed at $71.68 on the ICE Futures Exchange. Continued weakness in the oil market below $70 a barrel could send crude oil prices tumbling further.

On Thursday, the last day of trading for the June contract, WTI oil prices swung up and down by as much as 10 percent before settling 2 percent lower.

“The market tried to stabilise but started slipping again at the end of the day. Nothing changed, the trend is still down, until proven otherwise,” said analyst Tom Bentz at BNP Paribas.

The market also tumbled as the euro slumped to a new four year low against the US dollar on Wednesday as investors were shocked by Germany’s unilateral move to impose restrictions on what it termed highly speculative trading practices.

A stronger US unit makes dollar priced crude oil more expensive for buyers using weaker currencies, denting demand, which leads to lower oil prices.

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