U.S. Oil Prices Fall on Recession Worries

U.S. oil prices tumbled nearly 4% as concern grew that the fragile U.S. economy would sink into recession. Crude oil for October delivery on the New York Mercantile Exchange fell $1.11 to $27.70 a barrel, just below the $27.77 level reached before last week’s terrorist attacks in the U.S.

News that hundreds of thousands of tons of unwanted U.S. and Middle East jet fuel are heading to Europe because of a slump in airline demand weighed on prices. Lending some support are fears that U.S. reprisals for last week’s attacks could disrupt oil supplies from the Mideast.

The bearish sentiment was tempered slightly in after-hours trading, as the October contract traded up 2 cents to $27.72 a barrel when the American Petroleum Institute released data showing a 4.2-million-barrel drop in U.S. gasoline supplies, a sharper decline than analysts expected. The API report showed an 8.5% rise in demand from distributors to 9.45 million barrels a day.

The report also showed a smaller-than-expected drop in U.S. crude oil inventories and a rise in distillate fuel supplies that was in line with analysts expectations.