Oil falls, biggest weekly drop since Jan

NEW YORK (Reuters) - Oil fell on Friday, adding to losses that set prices down in the biggest weekly decline since late January as economic concerns sent investors seeking safer havens.

An offshore oil rig in a file photo. RETUERS/File

U.S. crude settled down 52 cents at $59.89 a barrel while London Brent crude fell 58 cents to settle at $60.52 a barrel.

Mounting worries that a rebound in the global economy may not be coming soon to help spur flagging fuel demand has sent prices down 10 percent this week, falling in six of the last seven trading sessions.

“The gloomy mood in the oil markets continues and it looks like participants are in the ‘hunker-down’ mode here. The economic data out today do not suggest that the economy is faring any better. And consumer confidence is poor,” said Phil Flynn, analyst for PFGBest Research in Chicago.

“The oil markets are moving with the stock markets here and we are seeing some short-covering before the weekend, so the losses have been pared as the stock market is also off its lows.”

U.S. consumer sentiment wilted in early July to the weakest since March, the Reuters/University of Michigan Surveys of Consumers showed, adding to the recession worries.

The report helped drag down U.S. stocks .N and helped push up the dollar and the yen, traditional safe-haven plays when risk aversion grows.

A U.S. government report showed the U.S. trade gap widened to $29.2 billion in April as exports weakened again in a reflection of waning global demand.

Investors have also been cautioned by moves by the U.S. government to reign in speculation in energy and metals markets.

Bart Chilton, a commissioner for the U.S. Commodity Futures Trading Commission said the agency would move aggressively and could implement new rules by late October and November.

In addition, U.S. Treasury Secretary Timothy Geithner proposed clamping down on dealers in freewheeling markets for derivatives.

A report by the International Energy Agency forecast demand would shrink this year but predicted oil consumption would grow by 1.7 percent in 2010, led by rising use in emerging economies as the developed world recovers from recession.

Slumping demand helped push up fuel inventories in top consumer the United States last week, according to a U.S. government report released on Wednesday, with distillate stockpiles hitting near 25-year highs.

Reporting by Matthew Robinson and Gene Ramos in New York; Emma Farge in London and Maryelle Demongeot in Singapore; Editing by Lisa Shumaker