* U.S. stocks tumble, Dow at lowest level in six years
* European stock index hits six-year low
* Tokyo stock index close lowest for 25 years
(Recasts, updates prices and market activity, changes dateline
from LONDON previous)
By Rebekah Kebede
NEW YORK, Feb 20 (Reuters) - Oil prices dropped more than
$1 on Friday as the deteriorating global economic outlook
stoked concerns that crude demand will continue to shrink.
U.S. crude futures for March delivery, which expire on
Friday, fell $1.13 to $38.35 a barrel by 1228 EDT (1728 GMT),
after posting the biggest settlement gain since Dec. 31 in the
previous session.
Brent crude fell $1.09 to $40.90 a barrel.
The losses tracked weakness in U.S. stocks, which fell
sharply led by banking shares on fears that a U.S. bank rescue
plan might lead to nationalization. []
Economic news was grim outside the United States as well,
with European shares hitting a six-year low as investors
fretted about capital increases and bank nationalization on the
back of a deepening economic downturn.
The broad Topix index of Japanese shares closed at its
lowest level in about 25 years.
A rally in gold, a traditional safe haven for investors, to
over $1,000 an ounce, its highest since March of last year,
also added pressure to oil prices by drawing investors away
from riskier markets, dealers said. []
Oil prices had rallied strongly on Thursday, jumping 14
percent after data showing an unexpected draw in U.S. crude
stocks. But worries over the health of oil demand have
resurfaced, with sentiment dented by sharp falls in equity
markets.
"There were some signs (in inventory data released
Thursday) that oil may be stabilizing, at least demand. But
this morning crude oil is lower and the market is still looking
at the weakness of the economy." said Peter Beutel, president
at Cameron Hanover in New Canaan Connecticut.
Crude inventories in the United States, the world's top
consumer, fell slightly last week on lower imports and higher
demand, the U.S. Energy Information Administration said,
snapping seven straight weeks of builds against market
expectations.
Crude prices have fallen more than $100 a barrel from the
peaks hit last July as the worsening economic crisis has bitten
into oil demand, prompting the Organization of the Petroleum
Exporting Countries (OPEC) to agree to deep output cuts.
In the latest indication that OPEC members are complying
with the agreed cuts, Kuwait notified at least two buyers in
Asia that it will keep curbs of 5 percent below contracted
volumes for April-June term crude oil supplies, steady from
March, trade sources said.
(Additional reporting by Christopher Johnson in London and
Chua Baizhen in Singapore; Editing by Christian Wiessner)
