* Global stocks fall to lowest since September
* Bank of America lowers 2010 oil demand forecast
* Coming up: U.S. API oil inventory statistics; 2030 GMT
(Updates prices)
By Emma Farge
LONDON, May 25 (Reuters) - Oil fell towards $67 a barrel on
Tuesday as investors fled from riskier assets to dollar safety
on growing concerns that the European debt crisis could worsen
and damage the still fragile global economic recovery.
The U.S. dollar index rose 1.3 percent as investors diverted
money from commodities into the greenback. <.DXY>
A slide in world stocks to their lowest since September 2009
on Tuesday also weighed on sentiment as equities are seen as a
key indicator of future energy demand growth. <.MIWD00000PUS>
U.S. crude <CLc1> fell $2.80 to $67.41 a barrel by 1302 GMT,
having fallen by more than $3 to as low as $67.15 earlier. Brent
crude <LCOc1> was down $2.22 at $68.95.
"It's risk aversion, falling stock markets and a stronger
dollar. People are worried the euro zone crisis will spread and
derail the global economic recovery," said Carsten Fritsch,
analyst at Commerzbank.
Bank of America Merrill Lynch <BAC.N> on Tuesday cut its oil
demand growth forecasts for 2010 to 1.5 million barrels per day
from 2 million bpd due to anticipated slower global economic
growth in the second half of the year. []
The U.S. crude benchmark West Texas Intermediate has fallen
by more than 20 percent from early May's 2010 high of $87.15 as
investors have liquidated long positions and some have bet on
further falls.
It touched a low of $64.24 on May 20, the weakest for a
nearby contract since July 2009 but has since recouped some of
those losses.
The euro also fell on Tuesday against a basket of
currencies, diminishing the buying power for dollar-denominated
commodities such as oil. <=EUR>
News that euro zone industrial new orders rose in March at
their fastest rate in 10 years did little to improve sentiment
in the oil market. []
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For a graphic on the performance of oil and other
commodities so far this year, click here:
http://graphics.thomsonreuters.com/10/CMD_PRFG0510.html
For a graphic on the close correlation between oil and the
euro, see here:
http://graphics.thomsonreuters.com/gfx/CT_20102505130654.jpg
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SUPPLY COMFORT
Oil markets remain well supplied with the Organization of
the Petroleum Exporting Countries pumping about 2 million bpd
above agreed output targets.
While oil is below the $70-$80 range many in OPEC have said
they prefer, OPEC officials have stopped short of calling for
any steps to prop up prices. The group has not made plans for an
emergency meeting, the oil ministers for Kuwait and the United
Arab Emirates said on Monday. [] []
A preliminary Reuters survey showed analysts were divided
over the direction of U.S. oil inventories last week. The poll
of six analysts called for an average drawdown of 100,000
barrels. []
Distillate stocks including heating oil and diesel were
forecast up 300,000 barrels on average.
Crude stocks at the delivery hub for U.S. futures contracts
in Cushing, Oklahoma are at a record high.
But some analysts said the market was unlikely to respond to
even a drop in inventories and would instead focus on equities,
currently seen as the bellwether for market sentiment.
"If the market is still bearish, I doubt a stock build will
lead to a drop in oil prices. What's important is how the stock
market develops," said Fritsch.
Geopolitical tensions in east Asia could further weigh on
the oil market after North Korean leader Kim Jong-il reportedly
told his military he might have to go to war if attacked after
the sinking of a South Korean ship. []
"The impact on oil prices would likely be bearish, since in
this area of the world, demand would be impacted far more than
supply," said Edward Meir at MF Global.
(For news from the Reuters Global Energy Summit, click on
http://www.reuters.com/summit/GlobalEnergy10?pid=500)
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey)
