An oil rig in the Gulf of Mexico. US crude stockpiles rose 2.02 million barrels to 365.1 million in the week ended June 18. Image Credit: AFP

London, New York : Oil prices fell for a third day to beneath $76 a barrel yesterday after a jump in US crude oil inventories outweighed the Federal Reserve's decision to keep interest rates near zero.

A dip in European shares yesterday also dampened sentiment and reinforced the correlation between oil and equities.

US crude for August fell 68 cents to $75.67 a barrel by 1150 GMT after earlier sinking to $75.55 a barrel. Prices pared losses after Eurozone industrial new orders for April rose at their fastest annual pace in 10 years, data showed.

ICE Brent futures were down 51 cents at $75.76.

"Monetary policy by the Fed and a somewhat weaker dollar are not fully balancing out the weakness in oil demand in the United States," said Eugen Weinberg of Commerzbank, citing high US crude oil stocks.

The Fed's decision is generally supportive for oil prices as low interest rates tend to stoke oil consumption. But the decision was also accompanied by bearish remarks that the US economic recovery is faltering.

This was born out in the oil market by data on Wednesday showing US crude oil stockpiles rose by an unexpected 2 million barrels, the Energy Information Administration said.

The hike in stocks came despite the Obama administration's ban on deepwater oil drilling in the Gulf of Mexico after the crude oil spill from BP's well in April. A US judge ruled against the ban on Tuesday in a decision being appealed by the government.

In a further sign that stocks will remain comfortable, the International Energy Agency said on Wednesday that global oil supplies will match expected growth of 1.2 million barrels in daily oil consumption through to 2015.

But while sentiment was weak, some analysts expect $75 a barrel to be a support cushion.

"The important psychological level is $75 — if it drops below there there could be further selling pressure," said Weinberg.

Still, oil prices are over $10 above the trough of below $65 a barrel hit a month ago when the spreading European debt crisis raised concerns about the future of regional fuel demand.

The market is expected to closely watch a tropical wave to the south of Cuba that has a 30 percent chance of becoming a tropical cyclone over the next two days, according to the US National Hurricane Centre. Storms could complicate the clean-up effort and affect oil production in the Gulf of Mexico.

"It's difficult to go higher than $80 a barrel," said Ken Hasegawa, a commodity derivative sales manager at Newedge Group in Tokyo.

The dollar fell to $1.2333 versus the euro in London, from $1.2311 in New York on Wednesday. The US currency declined for a second day as traders increased bets the Federal Reserve will keep interest rates near zero for longer to support a recovery in the world's largest economy.

The International Energy Agency said on Wednesday that growth in world oil demand will slow in the next five years as the pace of Chinese consumption eases.