London: Oil eased below $71 (Rs3,415.10) a barrel on Thursday, reversing early gains as the dollar firmed and equity markets slipped. US crude fell 28 cents to $70.75 a barrel by 11.39 GMT, and Brent crude fell 33 cents to $70.52 a barrel.
“Recently, the oil market is looking more at the correlation between the euro and the dollar,” said Ryuichi Sato, an analyst at Tokyo-based Mizuho Corporate Bank Ltd.
The dollar firmed against the euro on Thursday as European shares turned lower. The US unit initially slipped close to $1.40 against the single currency. A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies, and vice versa.
The fifth straight day of drops in European equities also weighed on prices.
Oil prices have been trading in a tight range around $70 a barrel over the past week, as investors assess whether the rally which has seen prices more than double since February will continue. Oil prices had initially inched higher on Thursday after Chinese oil data showed diesel exports fell to 390,000 tonnes in May from 510,000 tonnes in April.
Growing demand for oil from emerging economies such as China and India was one of the main reasons prices spiked to record highs near $150 a barrel last year.
Falling crude inventories and an increase in petrol demand in the US also supported prices, but enough concerns remain about the strength of global demand during the recession to leave prices vulnerable to a correction, analysts said.
Chua Baizhen in Singapore contributed to this story.