Crude Oil Falls a Second Day on Concern U.S. Growth May Wane

Crude oil fell for a second day in New York as an unexpected decline in U.S. retail sales raised speculation the economy is headed for a recession, crimping fuel demand in the world's biggest oil-consuming nation.

Sales dropped 0.4 percent following a revised 1 percent gain in November, including a 1.7 percent decline in purchases at gasoline service stations, the Commerce Department said yesterday. Oil reached a record $100.09 a barrel on Jan. 3 after rising 8.2 percent through December.

``There's a psychological component to people's behavior in the immediate term that affects what they do, with oil rising to $100,'' said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney.

Crude oil for February delivery fell as much as 40 cents, or 0.4 percent, to $91.50 in after-hours electronic trading on the New York Mercantile Exchange. The contract was at $91.75 at 10:37 a.m. in Singapore.

Yesterday oil fell $2.30, or 2.4 percent, to settle at $91.90 a barrel, the lowest close since Dec. 20. Futures are up 79 percent from a year ago.

``Economic news right now is really tipping toward slowdown or recession in the U.S.,'' said James Cordier, president of Liberty Trading Group in Tampa. ``That means tighter spending and the inability of people to pay $100 for crude oil and $3.50'' a gallon for gasoline.

OPEC Supply

Oil also fell after the Saudi Arabian oil minister said the Organization of Petroleum Exporting Countries will raise supply, if justified, after President George W. Bush urged an increase.

OPEC said Dec. 14 that global oil demand will rise 1.5 percent to an average 87.1 million barrels a day in 2008, little changed from the group's estimate the previous month. The International Energy Agency expects a 2.5 percent increase.

``I wouldn't be getting complacent about prices, we're still in the peak-demand period,'' Fat Prophets' Wendt said.

Brent crude for February settlement, due to expire today, fell as much as 18 cents, or 0.2 percent, to $90.80 a barrel in after-hours trading. Yesterday it fell $1.94, or 2.1 percent, to $90.98 a barrel on London's ICE Futures Europe exchange.

Saudi Arabian Oil Minister Ali al-Naimi's comments on OPEC production came before members are scheduled to meet Feb. 1 to discuss a possible increase in production. The 13 members account for about 40 percent of world oil supply and Saudi Arabia is the group's biggest producer.

``I would hope that as OPEC considers different production levels they would understand'' that if their ``biggest consumers' economy suffers, it will mean less purchases, less oil and gas sold,'' Bush said in Riyadh yesterday before a meeting with Saudi entrepreneurs.

Inventory Report

OPEC left output unchanged when it last met on Dec. 5, and the group's president, Chakib Khelil, said on Jan. 5 that markets remain adequately supplied.

A U.S. Energy Department report due later today will probably show that crude oil inventories gained for the first time in nine weeks as refineries took delivery of imports that were delayed to trim tax bills, a Bloomberg News survey indicated.

Oil stockpiles probably rose 1.25 million barrels last week, from 282.8 million barrels, according to the median of nine estimates in the survey of analysts.