10/04/2011 04:45 EDT | Updated 12/03/2011 05:12 EST

Oil near US$76 in Asia as Greece rocks markets, manufacturing shows waning demand

NEW YORK, N.Y. - Oil prices can't find a leg to stand on.

Many of the key factors that drove oil to three-year highs in May — fears of growing Middle East tensions, rising Chinese demand, bullish views from investment banks and expectations of an aggressive U.S. stimulus plan — have been diminished.

Meanwhile, a looming financial crisis in Europe has spooked energy markets as it raises the spectre of another global recession.

Benchmark crude has dropped 32 per cent since peaking near US$114 a barrel in late April. Oil slipped as low as US$74.95 on Tuesday, the cheapest price since September of last year, before rising to under US$76 a barrel.

A decline in oil prices reflects an increasingly dim view of the world economy. Oil demand was expected to rise sharply this year as factories expanded production and consumers bought more cars. Economists still expect global demand for oil to grow but at a slower pace.

The Paris-based International Energy agency reduced its forecast for global demand this year by about 60,000 barrels a day to an average of 89.5 million barrels a day.

Goldman Sachs has routinely predicted a significant increase in oil prices. On Wednesday, the investment bank pulled back a bit, saying that financial stress in Europe will slow energy demand growth.

Goldman cut its 12-month expectation for benchmark crude by $10.50 to US$116 a barrel and it cut its Brent crude forecast by $7.50 to US$122.50 a barrel.

In a separate report that could have implications for the energy markets, the investment bank cut its expectations for economic growth in China as the U.S. and other countries order fewer Chinese-made products.

In Tuesday trading, Brent crude lost $1.92 to finish at US$99.79 a barrel in London. That was the first time Brent ended lower than US$100 since February. But Brent, which is the benchmark for many international varieties of oil, is still up 5.3 per cent for the year.

The benchmark U.S. crude dropped for a third day, giving up $1.94 to end the day at US$75.67 a barrel in New York. It's down 17.2 per cent so far this year.

Oil fell early in the day as Greece, the centre of Europe's financial crisis, said it has enough money to pay its bills until November. Europe's leaders are still deciding whether to give it more emergency loans.

"If they don't work out a deal to handle Greece's credit problems, then confidence goes away in their ability to handle other eurozone countries with budget problems," PFG Best analyst Phil Flynn said.

MasterCard SpendingPulse also said that American drivers continue to cut back on gasoline purchases. Its survey of credit card spending showed that motorists bought less gasoline last week when compared with the same period last year.

In other energy commodities, heating oil gave up 2.95 cents to finish at US$2.7234 a U.S. gallon (3.79 litres) and gasoline futures lost 2.26 cents to finish at US$2.4884 a gallon. Natural gas rose 2.1 cents to end at $3.638 per 1,000 cubic feet.