The price of oil hovered above $82 a barrel Tuesday after touching an eight-month low near $81 earlier in the session amid concern Spain's bank bailout won't be enough to stem Europe's debt crisis and suggestions OPEC could boost production targets.
By early afternoon in Europe, benchmark oil for July delivery was down 24 cents to $82.46 per barrel in electronic trading on the New York Mercantile Exchange. Earlier on Tuesday, oil dropped to $81.07, the lowest since October, having dropped $1.40 on Monday.
In London, Brent crude for July delivery was down 72 cents at $97.37 per barrel on the ICE Futures exchange.
Crude jumped temporarily on Monday after the 17 countries that use the euro common currency pledged to lend Spain $125 billion to rescue its faltering banks. However, attention soon turned to the Greek election this weekend, the outcome of which could determine if Greece stays in the euro.
"There are highly uncertain and fragile economic conditions across the eurozone that dominate the markets and cause nervous trading and volatility," said analysts at Sucden Financial in London.
Oil has plunged about 24 percent from $106 since early last month amid signs of slowing economic growth in the U.S., China and Europe.
Traders will also closely watch a quarterly meeting of the Organization of Petroleum Exporting Countries in Vienna on Thursday. Some members of the cartel have suggested recently that OPEC is producing too much crude, and the group could decide to cut supplies to help boost prices.
An OPEC report showing oil output at its highest in the last four years is sure to be used by price hawks such as Iran and Venezuela. The monthly report, published Tuesday, showed OPEC production just short of 33 million barrels a day. That's almost 3 million barrels more than the organization's overall quota and more than 630,000 barrels above the May figure.
The report said it expected world demand this year to increase by 0.9 million barrels a day while saying at the same time that economic uncertainty might upend that prediction and lead to "a further decline in world oil demand."
Saudi Oil Minister Ali al-Naimi, however, said OPEC needed to raise its production target of 30 million barrels a day.
Al-Naimi's remarks indicate "that the world's leading oil supplier has no intention of cutting back on production despite recently lower prices and an apparent oversupply in the market," said a report from JBC Energy in Vienna.
"If production remains at its current level, the global oil market risks seeing a supply surplus of well in excess of 1 million barrels per day in the second half of the year, which would exert further pressure on the oil prices," said analysts at Commerzbank in Frankfurt.
In other energy trading, heating oil was unchanged at $2.6357 per gallon while gasoline futures fell 1.13 cents to $2.6453 per gallon. Natural gas lost 1.4 cents to $2.204 per 1,000 cubic feet.
Alex Kennedy in Singapore and George Jahn in Vienna contributed to this report.