Crude futures fell more than $1 on Tuesday after an overnight rate increase in India and a surprise contraction in the UK economy fanned concerns about the pace of the global recovery, and ahead of an expected build-up in U.S. inventories due later.
By 1257 GMT, U.S. crude benchmark West Texas Intermediate (WTI) was down $1.23 at $86.64 a barrel. Brent future prices were down $1.19 to $95.42 a barrel.
India's overnight interest rate increase was accompanied by a central bank warning that stronger inflation risks remained, renewing concerns that oil-hungry emerging economies could temper their demand growth.
"Everything is down today, not just crude," Commerzbank's Carsten Fritsch said, as copper fell more than two percent and gold fell to its lowest in ten weeks.
"We saw a similar price move already last week when there was concern about further tightening in China, but it proved to be short-lived."
A surprise contraction in fourth-quarter UK GDP also pulled the euro off two-month highs.
"The UK GDP data is very much isolated, but basically it's an illustration of the type of growth we are going to get in 2011, particularly in Europe," CA CIB's Christophe Barret said.
In the United States, a two-day U.S. Federal Open Market Committee (FOMC) meeting will get underway as the market awaits economic data including the S&P Case/Shiller Home Price Index for November due at 1400 GMT, the January reading of U.S. consumer confidence due at 1500 GMT, as well as a slew of earnings reports including Verizon, Johnson & Johnson, 3M and U.S. Steel Corp.