Oil falls sharply on global economic worries

NEW YORK (AP) - Oil prices fell more than 6 percent Thursday as
gloomy data showed a world economy at risk of slipping into
recession.
Bad news emerged from around the globe. A closely watched survey
in Europe indicated a recession could be on the horizon, and a
manufacturing survey suggested a slowdown in China, which has been
one of the hottest economies. Prices for stocks and other
commodities also plunged.
When the economy slows, so does demand for oil.
Oil has dropped 29 percent from a three-year high of $113.93 a
barrel on April 29. The price has come down because high
unemployment, weak consumer confidence and expensive gasoline have
slowed demand.
The Federal Reserve on Wednesday said U.S. economic growth is
slow, and that labor markets and household spending could stay
weak.
The central bank announced a plan to push long-term interest
rates lower - in an effort to stimulate spending by consumers and
businesses - but investors said it would have only minimal impact
because interest rates are already near record lows.
"This is just sudden and strong confirmation that the economy
is not improving," said Michael Lynch, president of Strategic
Energy & Economic Research. "Energy demand is going to be very
poor."
The departing chief economist of the European Central Bank
issued a rare public warning that heavy government debt threatened
the euro. Juergen Stark is resigning before the end of his term
amid talk that he is unhappy with the way the eurozone is handling
its banking crisis.
Benchmark crude on Thursday plunged $5.41, or 6.3 percent, to
end the day at $80.51 per barrel in New York. Oil finished at the
lowest point since Aug. 9. Brent crude, which is used to price oil
that's produced in foreign countries, fell $4.87, or 4.4 percent,
to end at $105.49 in London.
The belief that global growth is slowing is also pushing down
stocks, metals and fuels made from crude.
"This is part of a huge sweeping wave of deflation that's
hitting every major asset," said Tom Kloza, publisher and chief
oil analyst at Oil Price Information Service.
In other energy trading, heating oil fell 8.57 cents, or 2.9
percent, to finish at $2.8485 per gallon, and gasoline futures gave
up 10.65 cents, or 4 percent, to end at $2.56 per gallon. Natural
gas lost 2.5 cents to end at $3.705 per 1,000 cubic feet.

(Copyright 2011 by The Associated Press. All Rights Reserved.)


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