Oil Falls to 13-Month Low on Recession Concern, Equities Drop

By Mark Shenk

Oct. 16 (Bloomberg) -- Crude oil fell to a 13-month low because of skepticism a rescue of the world's banks will be enough to avoid a recession and stem a decline in global fuel demand, and after U.S. stocks plunged the most since 1987.

Oil, which has followed movements in equity markets this month, fell as the Standard & Poor's 500 Index and Dow Jones Industrial Average tumbled yesterday. The Organization of Petroleum Exporting Countries cut its 2009 demand forecast because of ``dramatically worsening'' financial market conditions.

``The oil market is under a lot of pressure and nothing is going to change that anytime soon,'' said Ric Navy, a broker at BNP Paribas SA in New York. ``We are entering a poor-demand cycle, which will put further downward pressure on prices.''

Crude oil for November delivery fell $1.02, or 1.4 percent, to $73.52 a barrel at 9:32 a.m. Sydney time on the New York Mercantile Exchange. It earlier touched $73.18, the lowest since Aug. 30, 2007. 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 on Oct. 13, when the market rallied the most since the 1930s on speculation government intervention will ease the credit crisis.

Exxon, Chevron

Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, the three biggest U.S. oil companies, led energy stocks to the biggest retreat among 10 S&P 500 industries yesterday.


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.

A government report today may 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 $3.73, or 5 percent, to settle at $70.80 a barrel on London's ICE Futures Europe exchange yesterday. It was the lowest settlement since Aug. 28, 2007.

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