Oil Falls 50% from July Record

Crude oil fell for a third day to below $73 a barrel, taking its decline from the July record to more than 50 percent, after a global stock plunge heightened concern bank bailouts won't prevent a recession.

Oil, which has followed movements in equity markets this month, fell as much as $1.58, or 2.1 percent, to $72.96 a barrel in after-hours trading on the New York Mercantile Exchange, the lowest since Aug. 30, 2007. It was at $73.35 a barrel at 11:06 a.m. Singapore time asAsian stocks slumped after the Standard & Poor's 500 Index had its biggest loss since 1987 yesterday. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast because of “dramatically worsening” financial market conditions.

“Demand in not just energy but across all consumer products is going to be hit,” said Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore. “That's just going to export recession to Asia and the manufacturing economies. 2009 is not going to be pretty.”

Prices are down 16 percent from a year ago and have dropped 50 percent from the record $147.27 a barrel reached on July 11. Yesterday, oil dropped $4.09, or 5.2 percent, to settle at $74.54 a barrel.

The retreat in stock prices over the past two days erased almost all of the gains in the S&P 500 and Dow Jones Industrial Average on Oct. 13, when the market rallied the most since the 1930s on speculation government intervention will ease the credit crisis.

Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York.

OPEC, supplier of more than 40 percent of the world's oil, cut its forecast yesterday for oil demand next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day. The 13-member group will hold an extraordinary meeting on Nov. 18 in Vienna, after a decision to trim supplies last month failed to stem a slump in prices.

Last week, the International Energy Agency, an adviser to 28 nations, lowered its projection for global oil demand next year by 0.5 percent to 87.2 million barrels a day.

“The story at the moment remains the fears of an international economic slowdown and what that means for oil demand,” said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. “The weakened economic outlook means the oil market is less tight.”

A government report today will show that U.S. crude-oil and gasoline inventories rose last week, according to the median of responses by analysts in a Bloomberg News survey. The report will be released a day late because of the Columbus Day federal holiday Oct. 13 in the U.S.

Hovensa LLC, operator of the third-biggest refinery in the Americas, was to close processing units at its St. Croix, U.S. Virgin Islands, facility because Hurricane Omar was forecast to hit the islands yesterday.

Brent crude oil for November settlement declined as much as $1.30, or 1.8 percent, to $69.50 a barrel on London's ICE Futures Europe exchange.

The November contract expires today. The more-active December future fell as much as $1.58, or 2.2 percent, to $71.00 a barrel.

Author: Jo Amey