(Adds API comment on demand, paragraph 8)
By Richard Valdmanis
NEW YORK, Jan 17 (Reuters) - Oil slipped toward $90 a
barrel on Thursday amid growing fears the U.S. economy will
slip into a recession and hurt demand from the world's top
energy consumer.
The loss stretches oil's slide to about 10 percent since
the record over $100 a barrel hit Jan. 3, taking pressure off
of producer-group OPEC to boost output at its next meeting in
February.
"The market may rally a bit but, with recession in the U.S.
becoming the major driver, it looks like the sentiment is to
sell rallies rather than buy dips," said Nauman Barakat, senior
vice president at Macquarie Futures USA in New York.
U.S. light crude for February delivery <CLc1> fell 71 cents
to $90.13 a barrel, the lowest settlement since Dec. 11. London
Brent crude <LCOc1> dropped 75 cents to $88.75.
In fresh signs of economic weakness, factory activity in
the U.S. Mid-Atlantic region contracted sharply in January and
home building in December fell to the slowest pace since the
early 1990s, according to reports on Thursday.
"The Philly Fed index (of factory activity) plunged into
recession territory," said Ian Shepherdson, chief U.S.
economist at High Frequency Economics, in Valhalla, N.Y. "This
is very alarming, because we had pinned our hopes on the
relative strength of the corporate sector offsetting some of
the housing hit."
Federal Reserve Chairman Ben Bernanke said Thursday that
more interest rate cuts may be necessary to counter the
worsening economic outlook, but he said the Fed has not
forecast a recession.
U.S. demand for crude oil and petroleum products fell 0.6
percent in December from a year earlier as a slowing economy
and higher pump prices reduced gasoline consumption, the
American Petroleum Institute said on Thursday.
Adding downward pressure to oil prices, a government report
released on Wednesday showed a bigger-than-expected increase in
U.S. crude stockpiles amid a rebound in imports and a slide in
domestic demand from refineries.
It was the first weekly increase in stockpiles since early
November, ending a run of declines that had pushed inventories
to the lowest since October 2004.
OPEC reacted coolly this week to a call from U.S. President
George W. Bush for more oil output to bring down prices and
ease strain on the economy.
OPEC President Chakib Khelil said there was no reason why
the group should raise output at its next meeting on Feb. 1 if
oil inventories recovered in the second quarter, a time of year
global consumption tends to slow.
He predicted prices will trade between $80 and $90 in the
first quarter, but forecasts for the rest of the year were
difficult due to the possible impact of the credit crunch
arising from the crisis over U.S. subprime mortgages.
The market had risen more than a dollar earlier in the
session on concerns of escalating Middle East tensions after
Israel carried out a missile test. Israel Radio said the
missile tested was capable of carrying an "unconventional
payload."
Israel believes Iran is trying to build a nuclear weapon, a
charge Iran denies.
(Additional reporting by Maryelle Demongeot in Singapore and
Randy Fabi in London; Editing by David Gregorio)
