Oil prices fell toward $78 a barrel Monday as the threat to crude production in the Gulf of Mexico from tropical storm Bonnie diminished and investors awaited economic data from the United States.
By early afternoon in Europe, benchmark crude for September delivery was down 56 cents at $78.42 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 32 cents to settle at $78.98 on Friday.
Most Asian stock markets rose Monday, taking heart from a 3-percent rally in the Dow Jones industrial average over the final two trading sessions of last week, but bourses in Europe were mostly lower. Oil traders often look to equities as a guidepost of overall investor sentiment.
The Dow rose to a one-month high Friday after most companies reported impressive earnings during the first two weeks of the second-quarter corporate earnings season. Investors will be eyeing results this week from insurer Aetna, drug company Merck and Southwest Airlines along with data on housing, employment and consumer demand.
Bonnie, which was a tropical storm Friday, petered out when it reached the Gulf of Mexico and didn't damage any of the region's oil installations. However, the threat of Bonnie caused companies to evacuate offshore rig workers and temporarily shut down some crude production.
Despite easing Monday, oil prices were still near the 11-week high of $79.60 reached on Friday, perplexing analysts.
"There is plenty of crude, mountains of distillate and more than enough gasoline in storage to make it through a couple ferocious storms," said a report from U.S. energy consultancy Cameron Hanover. "Traders and investors continue to like buying oil, for reasons that are not immediately or readily apparent to those steeped in fundamental knowledge."
In other Nymex trading in August contracts, heating oil fell 1.05 cents to $2.0400 a gallon, gasoline dropped 2.41 cents to $2.0981 a gallon and natural gas slid 3.7 cents to $4.543 per 1,000 cubic feet.
In London, Brent crude was down 48 cents to $76.97 a barrel on the ICE Futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.