Oil falls as economy concerns weigh

By Matthew Robinson

NEW YORK (Reuters) - Oil prices fell on Wednesday on a sharp increase in U.S. crude oil inventories and rising concerns that economic problems could erode fuel demand in the world's top energy consumer.

U.S. crude settled down $1.06 at $90.84 a barrel, after falling to $89.26, the lowest level since December 18. London Brent crude fell $1.23 to settle at $89.75 a barrel.

U.S. crude stocks swelled by 4.3 million barrels to 287.1 million barrels last week, the first build in nine weeks, Energy Information Administration data showed. <EIA/S>

Analysts had forecast a rise of 600,000 barrels.

"The latest EIA data confirm the weakening trend in demand and will keep the market bearish in combination with recessionary fears that have hit all financial markets," Tom Knight, a trader with Truman Arnold, said.

U.S. crude futures have fallen from a record high above $100, which they hit this month on concerns a potential U.S. recession could hurt demand growth, pushing analysts to revise their consumption forecasts.

The International Energy Agency, an adviser to industrial countries, on Wednesday cut its 2008 global demand growth forecast by 130,000 barrels per day to 1.98 million bpd and said it may lower the figure further.

"We have seen some negative studies on the macroeconomic front, and the IEA report this morning is moderately bearish," said Mike Wittner, head of oil research at Societe Generale.