Oil Falls Below $100 on Speculation Recession May Curb Demand

By Alexander Kwiatkowski

Oct. 1 (Bloomberg) -- Crude oil fell below $100 on speculation the U.S. economy will fall into recession, curbing fuel demand in the world's biggest gasoline consumer.

Crude fell on concern that credit-related bank failures in the U.S. and Europe will trigger a global recession. An Energy Department report later today will probably show U.S. crude inventories rose, the first increase in six weeks.

``With economic growth faltering in a number of countries, we have to assume that energy demand will be adversely impacted,'' said Edward Meir, analyst at MF Global Ltd. in Connecticut. ``Oil prices should be below last year's levels of $80 a barrel as the current picture looks far worse than it did at this time last year.''

Crude oil for November delivery dropped as much as $1.78, or 1.8 percent, to $98.86 on the New York Mercantile Exchange. It traded at $99.20 at 1:43 p.m. London time. It earlier gained as much as 2.2 percent to $102.84.

Futures fell 28 percent in the third quarter, the largest drop since 1991. Oil slumped $10.52, or 9.8 percent, to $96.37 a barrel, on Sept. 29, the most in percentage terms since Nov. 15, 2001, as the Standard & Poor's index of 500 stocks tumbled the most since the 1987 crash.

A week earlier, prices jumped a record 16 percent. Such swings have increased volatility to its highest since the first Gulf War in 1991.

Crude inventories are expected to rise 2.75 million barrels from 290.1 million barrels a week earlier, according to the median of 13 analyst estimates before an Energy Department report today.

Brent crude oil for November settlement fell as much as $1.84, or 1.8 percent, to $96.36 a barrel on London's ICE Futures Europe exchange. It was at $96.55 at 1:26 p.m. London time.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net