Benchmark crude for August delivery fell 57 cents to $68.67 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Tuesday, it rose $1.74 to settle at $69.24.
Oil came off an eight-month high near $73 a barrel earlier this month, and has bounced around in the upper $60s this week, as investors eye the dollar and buy crude as protection against possible inflation down the road.
"Crude is following the dollar," said Jonathan Kornafel, Asia director for market-maker Hudson Capital Energy in Singapore. "Right now, crude is largely being bought as an inflation hedge."
The euro was slightly higher at $1.4107 on Wednesday. The dollar fell 2.37 cents against the euro Tuesday. The dollar was little changed at 95.33 yen.
A three-month rally that brought crude from below $35 a barrel in March stalled this month on growing doubts the world economy will be in recovery mode by the end of this year.
Traders also expect volatility to ease over the next couple months as many investors take summer holidays.
"July and August are typically very dead trading months," Kornafel said. "I think we're stuck in a range for now between the mid-$60s and $70."
In other Nymex trading, gasoline for July delivery fell 3.74 cents to $1.86 a gallon and heating oil dropped 2.31 cents to $1.75. Natural gas for July delivery was steady at $3.89 per 1,000 cubic feet.
In London, Brent prices fell 54 cents to $68.26 a barrel on the ICE Futures exchange.
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