Oil Falls on Signs Rate Cuts May Not Bolster Economic Growth

By Mark Shenk

Oct. 9 (Bloomberg) -- Crude oil fell on concern that the coordinated cut of interest rates by central banks yesterday may be insufficient to prevent a prolonged global recession.

Oil prices have plunged since reaching a record in July on signs that fuel demand will drop because of the weak economy. The Federal Reserve, the European Central Bank and the Bank of England cut rates to spur an economic rebound. The U.S., the world's biggest oil-consuming country, is now in a recession, according to economists surveyed by Bloomberg News.

``The main driver of the market has been concern that the global economy will contract,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``There's been a lot of trading on emotion because of the recent headlines.''

Crude oil for November delivery fell 87 cents, or 1 percent, to $88.08 a barrel at 10:12 a.m. on the New York Mercantile Exchange. Futures touched $86.05 yesterday, the lowest since Dec. 6. Prices, which are up 9.7 percent from a year ago, have dropped 42 percent from the record $147.27 a barrel reached on July 11.


``We held at important support around $86 yesterday,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``If we are able to break through, prices are going to fall to the lower $80s and maybe the high $70s.''

Brent crude oil for November settlement declined 86 cents, or 1 percent, to $83.50 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.