World oil prices sank to multi-month lows on Wednesday, as the dollar hit a 22-month peak against the European single currency on concerns over a possible Spanish bailout, dealers said.
Brent North Sea crude for July slid to $105 per barrel, touching the lowest point since Dec. 20.
New York's main contract, West Texas Intermediate crude for delivery in July dropped as low as $89.10 a barrel, striking a level last seen on Oct. 24.
"The euro is at $1.24 -- a low not seen since July 2010 -- so obviously there's very negative macroeconomic sentiment, and that's what's weighing on all markets including oil," said VTB Capital analyst Andrey Kryunchenkov.
Asian and European stock markets sank on Wednesday and the euro hit a new 22-month low at $1.2434, investor sentiment was battered by mounting concerns over a potential Spanish bailout, dealers said.
The stronger greenback makes dollar-priced crude more expensive for buyers using weaker currencies, like the euro. In turn, that tends to dent oil demand and pull prices lower.
"Spain remains the key worry for the eurozone debt crisis, eclipsing optimism in Greece that the pro-bailout conservatives are leading the polls ahead of next month's election," added DBS Bank analysts in a commentary.
"As far as the eurozone crisis is concerned, the market does not see the light at the end of the tunnel," they added.
Investors are worried that Spain -- the eurozone's fourth largest economy -- could follow Greece, Ireland and Portugal in seeking a vast international bailout. This would likely weigh on crude demand.
Across the Atlantic, meanwhile, analysts forecast U.S. crude inventories to remain at the highest level for this time of the year in 22 years, indicating faltering demand in the world's largest oil-consuming economy.
Early forecasts call for U.S. crude stocks to drop by 400,000 barrels after rising by more than 35.4 million barrels over the past eight straight weeks, Dow Jones Newswires said.
"As U.S. stockpiles hit their highest level for more than 20 years, confidence is falling off a cliff," said Justin Harper, market strategist at IG Markets Singapore.
Weekly oil inventory data from the U.S. Energy Information Administration is expected to be released Thursday, a day later than usual due to Monday's Memorial Day public holiday.
Copyright Agence France-Presse, 2012
