* Oil down $1 on U.S. crude stocks rise
* Global economic weakness threatens fuel demand
* U.S. Fed leads round of interest rate cuts
* OPEC considers meeting in November as prices slide
(Updates prices, adds detail)
By Rebekah Kebede
NEW YORK, Oct 8 (Reuters) - Oil prices were lower on
Wednesday as concerns about the impact of the global financial
crisis on demand and rising U.S. inventories outweighed a move
by central banks to cut interest rates.
Earlier, oil prices had dropped to a fresh 10-month low,
but pared some losses when U.S. stocks rose after five sessions
of losses. []
News that OPEC members were considering an emergency
meeting in November to discuss the impacts of the financial
crisis on oil demand also underpinned prices.
U.S. crude <CLc1> settled at $88.95 a barrel, down $1.11.
London Brent crude <LCOc1> settled at $84.36 a barrel, down 30
cents.
"We've fallen to a new low for crude prices this year on
the latest inventory report and amid the raging credit crisis,"
said Phil Flynn of Alaron Trading in Chicago.
"In the past, whenever there was a credit crisis, investors
bought oil as a hedge. But that has changed now, because
everybody is realizing that the current credit crisis is
weakening economies and that's a big problem that will hurt
demand."
U.S. crude inventories rose 8.1 million barrels last week
as they recovered from storm disruptions, according to the U.S.
Energy Information Administration's weekly report. The rise was
much more than the 2.3-million-barrel build forecast by
analysts in a Reuters poll.
The EIA report also showed gasoline stocks increased 7.2
million barrels, compared with forecasts for a
1.1-million-barrel build, while total demand for products over
the past four weeks dropped 8.6 percent compared with a year
ago.
U.S. crude fell to $86.05, its lowest level since Dec. 6,
2007, when British government action to prop up its banks
failed to reassure financial markets and oil traders
anticipated oil demand would fall.
After the U.S. Federal Reserve led a coordinated interest
rate cut to shore up the global economy and financial markets
rallied, oil prices briefly rose.
But support from the rate cut was eclipsed by persisting
worries about demand, which has fallen in the United States and
other developed economies due to the financial market turmoil
and high fuel costs.
"The rate cut is supportive for oil, obviously. The
question is, is it going to be enough to inspire confidence?
You can cut rates to the bone, but if nobody's willing to lend
you money, it doesn't really matter," Flynn said.
The Federal Reserve cut its key interest rate by half a
percentage point to 1.5 percent. Other banks cutting interest
rates included China, which reduced its key rate by 0.27
percentage point.
Surging oil demand in China and elsewhere in Asia played a
large part in oil's sustained rally that culminated in a record
$147.27 a barrel in July.
Many analysts had predicted fuel demand in China would
remain strong, even if it plummeted in the United States, the
world's biggest energy consumer, but concern has mounted that
the Chinese economy will not escape global economic turmoil.
Members of the Organization of the Petroleum Exporting
Countries were consulting on whether to hold an emergency
meeting on Nov. 18, ahead of their next scheduled meeting in
December, to discuss the impact of the global financial crisis
on the oil market, Libya's top oil official said on Wednesday.
[]
Venezuelan President Hugo Chavez also said on Wednesday
that OPEC was calling for an extraordinary meeting.
[]
Some OPEC members have said oil production rate cuts may be
needed, if oil prices continue to drop.
Nigeria's oil minister on Wednesday was among the latest to
say OPEC might need to reduce output.
"There may be a need to intervene to balance the market, if
the price slide seemingly predicted on (lower) demand and
over-supply continues," Odein Ajumogobia told Reuters.
[]
(Additional reporting by Gene Ramos in New York and Joe Brock
and David Sheppard in London; Editing by Walter Bagley)
