* Oil falls more than $6, the biggest slide in dollar-terms
since 1991, on U.S. economic concerns
* Fed's Bernanke says financial markets under "considerable
stress"
* Dollar falls to record low against the euro
(Updates U.S. inventory forecast in last paragraph)
By Matthew Robinson
NEW YORK, July 15 (Reuters) - Oil dropped more than $6 on
Tuesday, the largest drop in dollar terms in 17 years, as
growing concern about the economic health of top energy
consumer the United States stirred demand worries.
U.S. Federal Reserve Chairman Ben Bernanke said financial
markets were under "considerable stress," adding to concerns
about the strain of the weak housing market and high energy and
food prices on the U.S. economy.
U.S. crude <CLc1> settled down $6.44 at $138.74 a barrel,
the biggest one-day drop since 1991, when prices retreated at
the start of Operation Desert Storm. The session low was
notched at $135.92 earlier.
London Brent crude <LCOc1> fell $5.17 to $138.75.
"It would appear to be some large-scale bank liquidation --
not a specific bank but banks in general," said Addison
Armstrong, director of market research for Tradition Energy in
Stamford, Connecticut.
Investors have piled into oil and other commodities this
year as a hedge against inflation and the weak dollar, pushing
crude up nearly 50 percent to over $147 a barrel this month.
The gains extended a six-year oil rally launched as surging
demand from emerging economies like China and India stretched
supply growth.
But consumers in large economies like the United States,
already feeling the pinch of the credit crunch and housing
crisis, have begun to scale back on energy use with U.S. summer
gasoline consumption falling from last year.
Fed chair Bernanke on Tuesday acknowledged that financial
markets had grown more anxious, particularly over the financial
condition of mortgage finance companies Fannie Mae <FNM.N> and
Freddie Mac <FRE.N> [].
"The market is beginning to take notice of downbeat
forecasts, as in what Fed Chairman Bernanke has warned about
the risks to the economy," said Andy Lebow, broker for MF
Global in New York.
"For the oil markets, that weighs heavily on demand. As the
U.S. economy continues to struggle, demand for oil going
forward is worrisome. On gasoline, for example, demand has
contracted already and refinery margins are going down."
U.S. retail gasoline demand plummeted more than 5 percent
last week from a year ago as high gasoline prices kept drivers
off the road, MasterCard Advisors said. []
Oil cartel OPEC on Tuesday cut its global demand forecast
for 2008 for the fourth time this year, adding consumption
would continue to slow in 2009. []
Adding downward pressure on prices, Brazilian oil giant
Petrobras <PETR4.SA> <PBR.N> said its oil output was back at
full capacity and would remain so through the end of a five-day
energy workers strike that started at midnight on Sunday.
Chevron <CVX.N> restored production at the
120,000-barrel-per-day Escravos pipeline in Nigeria, resolving
one of the disruptions that have cut the African country's
supply.
Traders are keeping a watch on a low-pressure weather
system about 1,200 miles (1,931 km) east of the Lesser Antilles
which may develop into a tropical depression.
A revised Reuters poll ahead of weekly U.S. inventory data
to be released on Wednesday forecast U.S. crude stocks fell 2.1
million barrels last week, while gasoline inventories dropped
400,000 barrels and distillates rose by 2.0 million barrels.
(Additional reporting by Gene Ramos and Robert Gibbons in New
York, Santosh Menon and Alex Lawler in London and Luke
Pachymuthu in Singapore; Editing by David Gregorio)
