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Oil slips on increased supply

By Annalyn Censky, staff reporter

NEW YORK (CNNMoney.com) -- Oil prices slid in global trading Thursday as investors continued to react to growing U.S. inventories reported by the government and concerns about economic instability in Europe.

What prices are doing: Crude for June delivery slipped $1.25, or about 1.65%, to settle at $74.40 a barrel Thursday.

Click the chart for the current price of oil and other commodities.

Gasoline prices at the pump fell for the seventh day in a row, slipping to $2.890 a gallon from $2.896 the day before, according to a survey by motorist group AAA.

What's moving the market: On Wednesday, the U.S. Energy Information Administration showed oil supplies last week grew more than expected across all three major categories: crude, gasoline and distillates.

One stockpile in particular, in Cushing, Okla., grew to a record high 37 million barrels.

Meanwhile, worldwide demand for oil looks to be down more than expected this year, according to a report released earlier Wednesday by the Paris-based International Energy Agency.

Over the last year, oil traders have been counting on an economic recovery in the United States to boost oil consumption. Inventories that keep rising fly in the face of their predictions and discourage investors from holding the next month's futures contracts.

European debt concerns have also put a damper on prices as oil traders worry economic instability in the region could further curb demand for fuel. Overall, oil is about $10 a barrel lower than it was two weeks ago.

What analysts are saying: Concerns about higher U.S. inventories, lower global demand and the expiration of the June futures contract on May 17 are leading traders to reduce their exposure to oil, in favor of other investments like gold, said Rich Ilczyszyn, a market strategist with futures broker Lind-Waldock.

But the underlying issue at the heart of oil's decline the last few weeks is still Europe's struggle with debt, he said.

"We've really been hanging our hat on the concept that global demand was going to be up, and we didn't understand the magnitude of the Greece issue affecting the whole world," Ilczyszyn said. To top of page

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