LONDON – Oil prices fell below $61 a barrel on Tuesday, eroding four straight days of gains, after a deep fall on China's stock market raised concerns about the economic health of the world's second biggest oil user.
By 1405 GMT U.S. crude was down $1.29 at $60.10 a barrel. London Brent crude was $1.22 lower at $60.11.
U.S. crude has achieved a higher close for the past four sessions — the first time it has done so this year — and reached a 2007 peak of $61.80 a barrel in intraday trade on Friday.
Selling on Tuesday followed news China's Shanghai Composite had fallen by nearly nine percent, its biggest drop in a decade, ahead of a parliament session next week rumoured to be considering higher interest rates to cool economic growth.
The selloff triggered falls on other equity markets and across the commodities complex.
"I think that the action ... is definitely driven by the strong correction in the equity market," said Olivier Jakob of Petromatrix.
But he cautioned against calling the end of Asian or world growth for commodities and said the oil market had already been vulnerable to a correction lower after the gains of the past few trading sessions.
Oil has swung from a record $78.40 last July to a 20-month low of $49.40 last month.
A rally that began last week was spurred in part by oil producer Iran's refusal to halt uranium enrichment and that remains a driving factor, analysts said.
At a meeting on Monday the five permanent members of the United Nations Security Council plus Germany agreed to work on a new Security Council resolution to put pressure on Iran to abandon its nuclear programme.
A U.S. State Department spokesman said the six countries would hold phone talks on Thursday to start hammering out the elements of a resolution.
Price gains were further driven by last week's declines in stocks of refined products in the United States and that trend is expected to continue.
Analysts polled by Reuters expect U.S. weekly data to be released on Wednesday will show a 2.5 million barrels decline in distillate inventories, their fifth consecutive fall.
Gasoline stocks — increasingly in focus ahead of the U.S. driving season — were projected to have fallen by 1.7 million barrels, with crude inventories expected to rise by 1.4 million barrels, according to the survey.