(Updates prices)
By Santosh Menon
LONDON, Jan 10 (Reuters) - Oil tumbled $2 to stand below $94
a barrel on Thursday as concerns about a wider economic slowdown
raised the possibility of weakening energy demand.
U.S. crude <CLc1> was down $2.03 at $93.64 a barrel by 1601
GMT, off lows of $93.30, but adding to losses of 66 cents a day
earlier. London Brent crude <LCOc1> shed $1.78 cents to $92.59.
Fears the U.S. economy could slip into a recession have
grown over the past several weeks, which could potentially hit
demand for oil from the world's top consumer.
On Thursday signs of a slowdown emerged in the Euro zone as
well, as data showed industry suffered a setback in November
with French and Spanish production mirroring a decline already
seen in German industrial production.
"Fears over weakening oil demand seem to be outweighing
concerns over supply," MF Global analysts said in a note.
"Fed officials are expressing deep concern over the economy
so the outlook for oil demand this year has certainly dimmed.
These worries are clearly trumping any bullish elements in the
market calculus," the note added,
Oil fell on Wednesday after a rise in fuel stocks in the
United States offset a steep decline in crude supplies.
Supplies of gasoline in the United States jumped 5.3 million
barrels and distillates rose 1.5 million barrels last week, far
exceeding analyst expectations. []
Muting the bearish impact of the data, the U.S. Energy
Information Administration said crude inventories tumbled 6.8
million barrels to the lowest level since October 2004.
Analysts said the weekly stocks data showed a build in
stocks of diesel, mainly used by the U.S. trucking and transport
sector, which could be a forewarning about the wider economy.
"One week does not make a trend, but if diesel demand in the
U.S. starts to weaken, that to me is a warning for the economy
as well," said Mike Wittner, global head of oil research at SG.
Oil is below last week's lifetime high of $100.09 a barrel,
pressured partly by concerns that a U.S. economic slowdown will
erode energy demand.
Investment bank Goldman Sachs said on Wednesday it expected
the world's biggest economy to tip into recession this year.
Former U.S. Treasury Secretary Larry Summers added his voice
to the chorus predicting a recession on Thursday, saying the
chance of a U.S. recession was more than 50 percent.
"I believe to an abnormal extent that the U.S. and global
economies are at an inflexion point, with higher risk of
recession than ever before this century," he told an investor
conference in Oslo.
"That the U.S. economy will stall and fall into recession,
seems to be the most likely case," said Summers, who was
Treasury Secretary in 1999-2001 in the Clinton administration.
The Organization of the Petroleum Exporting Countries, which
supplies more than a third of the world's oil, is keeping a
close watch on the economy.
OPEC President Chakib Khelil said on Thursday he expected
demand and prices to be affected if the malaise reached global
proportions.
"We are closely following with interest the evolution of
this crisis which could, if it comes to affect Europe and the
rest of the world, bring about a decline in the development of
the world economy," Khelil said.
(Additional reporting by Yaw Yan Chong in Singapore and Peg
Mackey in London; editing by Anthony Barker)
