| NEW YORK
NEW YORK Oil prices fell sharply on Wednesday as disappointing economic data from China and Europe reinforced concerns about slowing growth and a weakening demand for petroleum, even as supportive U.S. data strengthened the dollar.
U.S. November RBOB gasoline futures retreated a second straight session, falling 2.5 percent, helping pressure U.S. crude to a two-month low.
Concerns about China and Europe allowed investors to shrug off any supportive sentiment that might have accrued from the U.S. Energy Information Administration's (EIA) inventory report. The EIA said U.S. crude stocks fell 482,000 barrels last week, against forecasts stockpiles would be up 1.5 million. <EIA/S>
"The global economy is in a rut, and even with supportive EIA data crude is down," said Dan Flynn, an analyst at Price Futures Group in Chicago.
Brent November crude fell $3.40 to settle at $108.17 a barrel. Wednesday's $107.67 low was the lowest price since September 20.
Brent's drop on Wednesday put it in sight of the 100-day moving average of $106.28, after Tuesday's settlement below two technical levels also closely watched by traders charting price movements - the 50-day moving average at $112.06 and the 200-day moving average at $112.09.
U.S. November crude slumped $3.75 to settle at $88.14 a barrel, below its 100-day moving average of $89.99. It dropped to $87.70 in post-settlement trading, its lowest since prices fell to $87.23 on August 3.
The 4.08 percent slide was the biggest one-day percentage drop since June 21.
Total crude trading volumes were healthy, with Brent turnover 17 percent above its 30-day average and U.S. dealings surpassing its 30-day average by 22 percent.
In addition to the slump in U.S. gasoline, which settled 6.97 cents lower, heating oil joined in the retreat, falling 5.91 cents.
Gasoline's settlement left front-month futures down 54.25 cents from where October futures settled and went off the board last Friday.
U.S. gasoline stocks rose slightly, by 114,000 barrels, last week, the EIA's report said, while distillate inventories fell 3.69 million barrels, much more than expected.
Gasoline stocks were expected to be down 600,000 barrels, while total distillate supplies were estimated to be down only 400,000 barrels, a Reuters survey of analysts showed.
Ahead of Friday's closely watched September nonfarm payrolls report, separate reports showed U.S. private employers added more jobs than expected in September and activity in the vast services sector picked up.
The reports increased hopes that the U.S. economy might be on a more stable economic path and helped the dollar rise across the board, but a stronger U.S. currency can pressure dollar-denominated commodities like oil. <USD/>
While oil prices showed little reaction, traders and analysts were monitoring Middle East turmoil, including Turkey's military hitting targets inside Syria in response to a mortar bomb fired from Syrian territory.
U.S. Secretary of State Hillary Clinton held out the possibility on Wednesday that sanctions on Iran could be eased quickly if Tehran worked with major powers to address questions about its nuclear program.
In Tehran, Iranian police clashed with demonstrators and arrested money changers in Tehran in disturbances over the collapse of the Iranian currency, which has lost 40 percent of its value against the U.S. dollar in a week.
DISAPPOINTING EUROPE, CHINA DATA
Dwindling new orders and more layoffs marked a worsening decline for euro zone companies last month, according to business surveys released on Wednesday.
China's normally robust services sector weakened sharply in September to its lowest point since November 2010 as slow growth in manufacturing began to feed through to the rest of the economy, an official survey showed.
Highlighting the faltering economy's effect on oil consumption, retail sales in the euro zone barely rose in August as motorists cut back spending on fuel during the normally busy driving months in the summer.
"There's little to be cheerful about. There's worry about whether Spain will ask for a bailout or not and there's major uncertainty around China," said Filip Petersson, an analyst at SEB in Stockholm. "It's difficult to be bullish at the moment."
(Additonal reporting by Simon Falush and Peg Mackey in London and Ramya Venugopal and Wang Tao in Singapore; Editing by Marguerita Choy and Bob Burgdorfer)