Oil Prices Fall Below $74

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"Equities lower, dollar strengthens after a long weekend in the U.S."

Crude futures tumbled, falling after a long holiday weekend in the U.S., as equities opened lower and the dollar gained strength.

Light, sweet crude for October delivery recently traded $1.14, or 1.5%, lower at $73.46 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 23 cents lower at $76.64 a barrel.

Oil prices were hit by a drop in U.S. equities, as scant economic data this week have traders again looking at the stock market as a proxy for future oil demand. The Dow Jones Industrial Average lost 35 points in early trading after equities markets in Europe fell.

"The equities are coming off, and it appears that the correlation is back," said Kyle Cooper, a managing partner at IAF Advisors.

The euro was also down 0.6% against the dollar Tuesday after The Wall Street Journal reported stress tests on European banks underestimated the exposure of some banks to sovereign debt.

The focus on other asset classes comes amid a glut in U.S. crude supplies. Investors are worried about demand now that the U.S. summer driving season has ended, particularly as commercial stockpiles of oil and fuel products are at the highest levels in 27 years.

Economic reports in recent weeks have remained mixed, and analysts are concerned about the ability of a struggling economy to lower inventories.

"The difference between the most optimistic economic outlook and the reality of inventory overhangs has been getting worse and worse all year long," said energy advisory firm Cameron Hanover in a client note.

Oil prices are stuck in a tight range between roughly $70 and $80 a barrel, a situation that has persisted for months.

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