Oil falls to 13-month low on recession worry
NEW YORK (Reuters) - Oil tumbled on Wednesday, sliding to a 13-month low on expectations that a deepening economic slowdown will cut into already weakening demand.
Investors scurried to safe havens and global stock prices fell sharply as concerns over a potential global recession wiped away optimism fueled earlier this week by governments' steps to avert a financial meltdown.
U.S. crude fell $4.09 a barrel to settle at $74.54.
Prices subsequently fell to $73.18 in post-settlement trading, the lowest since August 31, 2007 and down more than 50 percent from a record $147.27 just three months ago.
London Brent crude fell $3.73, or 5 percent, to settle at $70.80 a barrel.
European leaders pressed for an overhaul of global financial structures, building on trillion-dollar bank bailouts announced this week.
Federal Reserve Chairman Ben Bernanke said the United States needs to enhance regulatory oversight authorities to deal with asset bubbles, as occurred in the housing market, that cause economic problems when they burst.
U.S. retailers in September suffered their biggest monthly drop in sales in more than three years, adding to concerns of a potential recession in the world's top consumer.
Slumping demand in the United States and other developed economies, as well as a flight of investors from oil to safer havens, has sent oil tumbling from July's record peak.
"The fall in crude futures prices today reflects movement in the stock market, which mirrors fears about a recession that will cut into demand for crude oil," said Joe Possillico, broker for MF Global in New York.
Analysts have scaled back global demand growth estimates, with the Organization of the Petroleum Exporting Countries cutting its forecasts for world demand for crude next year in its latest monthly report.
"Even if governments are successful in calming equity markets and unfreezing credit markets in the near future, the fallout on the real economy from financial market headwinds is expected to be considerable," the producer group said.
OPEC has set a November emergency meeting in Vienna to assess the global financial crisis' effect on the oil market.
U.S. retail gasoline demand last week fell more than 9 percent year-on-year for a second straight week as consumer spending slowed, MasterCard Advisors said.
JP Morgan cut its average oil price forecast for 2009 to $74.75 a barrel, citing the weak economic outlook.
"The oil market is caught in the wake of four tsunamis," the U.S. bank said. "A global recession, tighter credit, increased refining capacity and rising non-OPEC supplies."
Hurricane Omar caused Hess Corp (HES.N) to begin shutting units at its Hovensa refining joint venture in the U.S. Virgin Islands, lending some support to oil futures.
The storm briefly shut Venezuela's Puerto La Cruz refinery, but operations were restored on Wednesday.
Traders will scrutinize weekly U.S. oil inventory data due on Thursday for indications on U.S. oil demand, and analysts polled by Reuters expect increases in crude and oil products.
The data was forecast to show crude stocks up 1.9 million barrels, a 600,000-barrel build in distillates and a 2.9-million-barrel gasoline supply rise last week.
(Additional reporting by Bernie Woodall in San Diego, Matthew Robinson and Gene Ramos in New York, Ikuko Kao and Jane Merriman in London and Chua Baizhen in Singapore; Editing by David Gregorio)
