Oil prices slumped to below $85 a barrel today as the dollar strengthened and traders anticipated another increase in U.S. crude supplies.

By early afternoon in Europe, benchmark crude for June delivery was down $1.42 to $84.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 4 cents to settle at $86.19 on Monday.

Oil touched an 18-month high of $87.15 a barrel Monday, and has jumped about 23 percent since February on investor expectations that a growing U.S. and global economy will boost demand.

But U.S. crude inventories have risen in recent weeks and likely gained another 1.5 million barrels last week, according to a survey by the energy information arm of McGraw-Hill.

"Crude stocks are expected to rise once again by 1.2 million barrels, which would be the tenth weekly increase in a row," said a report from Commerzbank in Frankfurt. "Inventories are thus high enough to compensate for a temporary interruption of the oil supply" which may be caused by the oil spill in the Gulf of Mexico.

Still, the long-term effects of the spill were "highly uncertain, " said JBC Energy in Vienna.

"In the worst case, an interruption of crude supplies to refineries in (the Gulf area) could have severe consequences for the U.S. domestic product supply and prices," JBC said.

Investors are also concerned that higher prices for crude products such as gasoline will eventually undermine economic growth.