Oil slides below $63 as recession worry dominates
SINGAPORE (Reuters) - Oil fell for a third day on Tuesday, dropping below $63 a barrel as the unrelenting dive in Asian share markets underscored fears of a global recession that is already cutting into fuel demand.
The U.S. dollar's rise to another 2- year high early on Tuesday also weighed on oil prices, while traders set aside OPEC's decision last week to slash output by about 5 percent until they saw how quickly those cuts might take effect.
U.S. light crude for December delivery fell 52 cents or 0.8 percent to $62.70 a barrel by 12:38 a.m. EDT, off the day's low of $61.75 and after touching a low of $61.30 a barrel on Monday, its weakest since May 2007.
London Brent crude fell 76 cents to $60.65 a barrel.
"Traders choose to ignore OPEC's production cuts and focus instead on the continuing drop-off in demand," said Jonathan Kornafel, Asia director of Hudson Capital Energy.
"The drop in crude prices as well as the sharp and sustained increase in implied volatility is mirrored closely by global equity markets," he added.
On Monday, more U.S. banks lined up for government cash and the Group of Seven expressed concern that Japan's soaring yen currency -- which has surged to 13-year highs as investors flee risky assets for cash -- posed a threat to stability.
Japan's Nikkei average erased early losses to jump more than 2 percent on Tuesday, but that did little to help commodities, which have traded largely in line with equities recently.
The credit crisis, which began with failing U.S. mortgages, has mushroomed into a worldwide rout as investors dump stocks and commodities, shun higher-risk emerging markets and seek out the safest government bonds and currencies.
Oil prices have dropped by nearly 60 percent from a record above $147 a barrel in July as global economic turmoil dents world fuel consumption, with some analysts saying a fall to $50 a barrel -- widely seen as the cash cost of production for many newer oil projects -- is possible in the short term.
The decision by the Organization of the Petroleum Exporting Countries last week to cut 1.5 million barrels per day of output has done little so far to stem oil's fall.
Asian customers said on Tuesday they had yet to receive notice of the volumes of their Gulf crude oil shipments, with most expecting a 5-percent cut.
"For November, the allocation has been long fixed but we are not sure if they may change it later. For December, it's too early to say," a trader with a North Asian refiner said.
Traders were also looking ahead to U.S. crude oil stocks data, which will likely show an increase for the fifth week in a row last week on higher imports, a preliminary Reuters poll of eight industry analysts showed.
Crude inventories were seen up 1.2 million barrels.
(Reporting by Annika Breidthardt, Editing by Michael Urquhart)