Oil falls as recession fears drag down markets
NEW YORK (Reuters) - Oil prices fell on Tuesday to settle at a 22-month low as concerns about global economic weakness pushed down markets.
Uncertainty about the fate of talks over aid for General Motors Corp GM.N and other U.S. automobile makers fueled worries that helped send U.S. stocks lower.
U.S. crude settled down 56 cents at $54.39, the lowest settlement since January 29, 2007, erasing gains seen earlier in the day. London Brent crude fell 47 cents to settle at $51.84 a barrel.
"Crude oil futures moved down with Wall Street," said Andy Lebow, broker at MF Global.
"The oil market is in a major downtrend and moving down with equities confirms there is a lack of confidence in what brought prices up earlier."
The U.S. Treasury defended its handling of the financial bailout as American auto and banking woes reverberated around the globe. The International Monetary Fund said it would need rapidly increasing amounts of extra funding to fight the downturn.
Oil prices have dropped from record highs above $147 a barrel in July as the mounting economic crisis has clipped fuel demand in big consumer nations such as the United States.
The AAA motor group on Tuesday forecast U.S. travel for the upcoming Thanksgiving holiday next week would decline for the first time since 2002.
The steep drop in prices has prompted some members of the Organization of Petroleum Exporting Countries to call for more production cuts, after the cartel agreed to remove about 2 million barrels per day from world markets since September.
Trade sources said top exporter Saudi Arabia had not cut oil flows to the United States for December, after some Asian customers reported they had their allocations cut.
Traditional price hawk Iran has sought another 1 million to 1.5 million bpd in cuts and has called for talks with non-OPEC members on supply curbs.
"Iran is stating that OPEC will reach out to non-OPEC producers on supply coordination. OPEC will likely find a willing partner in Russia, and we have witnessed cooperation by Mexico and Norway in years past," John Kilduff, senior vice president at MF Global, said in a research note.
Russia, the leading non-OPEC producer, sent a high level delegation to observe OPEC's September meeting in Vienna and the group's secretary-general visited Moscow in October.
Still, Russia's output is stagnating regardless of any decision to curb production while Mexico faces output declines. Historically, non-OPEC cooperation with OPEC cuts has been unconvincing.
OPEC ministers will gather in Cairo on November 29 for informal talks, ahead of the group's next scheduled meeting is on December 17 in Algeria.
"It's a consultative meeting. All member-countries have been invited. No country has said it is not going to come," said OPEC spokesman Omar Farouk Ibrahim of the Cairo meeting.
A Reuters poll of analysts ahead of weekly U.S. inventory data due out Wednesday forecast crude stocks rose by 800,000 barrels last week, with distillate stocks seen up by 600,000 barrels and gasoline stocks 400,000 barrels higher.
(Reporting by Matthew Robinson, Robert Gibbons, and Gene Ramos in New York; Jane Merriman in London; Annika Breidthardt in Singapore; Editing by David Gregorio)
