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BLBG: Crude Oil Falls a Fourth Day as Slowing Growth May Stall Demand
By Nesa Subrahmaniyan

Oct. 6 (Bloomberg) -- Crude oil fell for a fourth day in New York as the credit crisis deepened in Europe, adding to concerns that global economic growth will slow and reduce demand for fuels.

Oil dropped as much as 3.4 percent as European leaders pledged to bail out troubled banks and protect depositors. World markets are oversupplied, Iranian Oil Minister Gholamhossein Nozari said on Oct. 4, and Saudi Aramco, the world's largest state oil company, cut its official selling prices for exports to Asia and the U.S., the world's No. 1 consumer.

``I hate to say it but it looks like the market is going down,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``Demand growth very likely is going to be negative and it might get worse before it gets better.''

Crude oil for November delivery fell as much as $3.16 to $90.72 a barrel in electronic trading on the New York Mercantile Exchange. It was at $90.80 at 2:51 p.m. in Singapore. Futures have fallen 37 percent from the record $147.27 reached on July 11.

The contract closed at $93.88 a barrel on Oct. 3, the lowest settlement price since Sept. 16, after U.S. lawmakers approved a $700 billion bank-rescue plan and the country's Labor Department reported a bigger-than-expected 159,000 drop in payrolls in September.

Gold tumbled for a fifth day as the dollar rallied to the highest in more than 13 months against six major currencies including the euro, reducing demand for bullion as an alternative asset.

Gold, Silver

Gold for immediate delivery fell 1.3 percent to $830.50 an ounce at 2:07 p.m. in Singapore. Silver for immediate delivery declined 1.2 percent to $11.0037 an ounce.

Copper, zinc and aluminum plunged by the exchange-imposed daily limit in Shanghai.

New York oil prices declined 12 percent last week as reports showed U.S. fuel demand the previous four weeks was the lowest in almost seven years and manufacturing shrank in September at the fastest pace since the last recession in 2001.

``The market is really going to slow pretty sharply over the next six to nine months,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``There are certainly brokers making downgrades to both U.S. growth and commodity prices generally.''

The U.S. may fall into a recession, the International Monetary Fund said on Oct. 2 in its most pessimistic outlook for the world's largest economy since the credit crisis began last year. The nation's fuel demand averaged 19 million barrels a day during the past four weeks, the lowest since October 2001, according to the U.S. Energy Department.

Saudi Price Cut

Saudi Aramco trimmed the price of its Arab Extra Light crude by 30 cents to a discount of $3.40 a barrel below the West Texas Intermediate benchmark, the Dhahran, Saudi Arabia-based producer said yesterday in a faxed statement. The company also cut the price of its Arab Light grade.

For Asian refiners, Aramco cut prices of its Super Light, Extra Light and Light crudes by $1.35, $1.10 and 65 cents. The prices of Arab Medium and Arab Heavy crude were also cut, each by 40 cents.

``When oil-product prices are under pressure, crude prices have to go down,'' Mitsubishi's Nunan said.

Brent crude oil for November settlement declined as much as $2.88, or 3.2 percent, to $87.37 a barrel on London's ICE Futures Europe exchange, and traded at $87.39 at 2:48 p.m. Singapore time.

Dollar Gains

There is also concern that the U.S. bailout may add ``stress'' to the rest of the economy, ANZ's Pervan said. The higher dollar, also weighing on oil, reflects expectations that the slowdown is spreading globally.

``The next step is for Europe and Asia to feel the pain,'' he said.

The dollar rose to a 13-month high against a basket of currencies, reducing the investment appeal of dollar-denominated commodities. The euro fell as low as $1.3658 in early Asian trading from $1.3772 in late New York trading last week, after Germany said it will guarantee personal bank deposits in a bid to stabilize the nation's banking system.

As oil prices decline, OPEC may be prompted to cut output causing supplies to ``tighten,'' Credit Suisse analysts said in a report Oct. 3.

``Uncertainties in the markets are high and we remain very cautious,'' the analysts led by Tobias Merath, head of the bank's commodity research, said in the report.

To contact the reporters on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.