Conditions in Europe continued to limit the risk appetite for commodities and the European single currency. Despite the massive EU/IMF bailout package, concerns that austerity measures to strengthen European fiscal health may lead to a downturn and curb the global economic recovery remained widespread. Germany's decision to ban so-called naked short selling in eurozone government bonds, insurance derivatives and some major financial stocks further stoked investor anxiety about increasing regulation. In a naked short, a trader sells a stock that he does not yet own, hoping to be able to borrow or buy it more cheaply and profit from the margin.

Worries about European growth and German regulation caused the euro to drop to a four-year low against the dollar on Tuesday.

Oil prices were also pressured by extremely high crude stockpiles at Cushing, Oklahoma, the delivery hub for WTI. According to the US Energy Information Agency (EIA), crude stored at the hub rose 900,000 barrels to reach a record 37.9 million. Total crude stocks rose 200,000 barrels to 362.6 million, the 15th increase in the last 16 weeks.

The other bearish news was the US Senate's approval of the Wall Street reform bill, with potential for major impact on the US financial system. It proposes a mechanism for liquidating large financial firms and a consumer watchdog, as well as a plan to curb bank swap-trading. The Senate bill must now be merged with one the House approved last December before President Obama signs it into law.

Elsewhere, positive economic data stoked optimism about the US recovery but not enough to arrest the downward trend of oil prices. Housing starts rose 5.8% in April to a seasonally adjusted annual rate of 672,000 units, the highest since October 2008, with strong support from tax credits. Inflation was a low 2.2% year-on-year in April, giving the Fed plenty of room to make its interest rate decision.

This week, Thaioil estimates that WTI will trade in the range of $67-74 as concerns over Europe and high US stockpiles continue to pressure the market. Traders will also focus on US economic reports including existing and new home sales, consumer confidence, durable goods orders, and first-quarter GDP.

Gasoline prices in Singapore plunged to a 5.5-month low of $78 a barrel last week, down almost $9, mainly due to sharp falls in crude prices. The market, however, shows signs of improvement on higher imports and tighter supplies, which will help support prices in the short term. Indonesia is expected to maintain high imports in July due to partial turnarounds at a refinery. On the supply side, availability is likely to be tighter on higher arbitrage outflows to the US as its summer driving season starts late this month. Chinese export volumes are also expected to be soft as the country needs to maintain sufficient stocks to meet healthy domestic demand, especially from the Shanghai Expo.

Huge drops in crude prices pushed diesel in Singapore down nearly $10 to around $80 on Friday. The market remained strong on healthy spot imports from India and Pakistan as well as arbitrage cargoes from South Korea to Chile. However, concerns over increasing supplies are expected to lead to bearish sentiment this week as most refineries in Asia will be coming back online from planned turnarounds next month.