U.S. recession worries hit crude prices
NEW YORK (Reuters) - Oil prices dropped a dollar on Friday, extending a sell-off from last week's $100-a-barrel record to almost 8 percent as dealers weighed the threat of a U.S. economic recession.
U.S. crude CLc1 settled down $1.02 to $92.69 a barrel, adding to Thursday's $1.96 decline. London Brent crude LCOc1 settled $1.15 lower at $91.07 a barrel.
Former U.S. Treasury Secretary Lawrence Summers said on Thursday the chance of a U.S. recession was more than 50 percent, adding to a chorus of comments from economists and analysts anticipating negative growth in the fallout of a housing crisis and credit crunch.
"The supply situation for crude remains very tight, but the looming 'R' word (recession) seems to have aroused more fear in market participants' psyches," MF Global said.
U.S. Federal Reserve Chairman Ben Bernanke said on Thursday the central bank was ready to take substantial measures to shore up the economy, raising expectations for a half-point interest rate cut at the Fed's January 29-30 meeting.
Another Fed rate cut could stem crude's fall by fueling selling of the already weak U.S. dollar and by adding-liquidity to the economy to protect growth.
Despite recent losses, oil has been trading above $90 for a month and hit a record high of $100.09 a barrel on January 3, driven higher by strong demand and tight supplies.
U.S. government data this week showed nationwide crude stockpiles at their lowest level since October 2004, after having slumped about 10 percent since early November on a slowdown in import levels.
Frequent supply disruptions from major oil exporters have also underpinned oil's recent gains.
In Nigeria, militants fighting for autonomy in the country's oil producing south detonated a remote-controlled bomb on an oil tanker on Friday, causing a big fire.
It was the second rebel attack on Africa's largest oil industry in a week. Militant attacks since 2006 have knocked out a fifth of the country's oil output capacity.
The market also found support from data showing China's unwavering thirst for oil. The world's second-largest oil consumer boosted purchases of crude imports by 12.4 percent last year as the economy boomed, domestic production growth stalled and new oil storage tanks were filled.
