* Oil falls over $1 to below $109, demand worries weigh
* Gustav moves off radar, traders eye storms Hanna, Ike
* U.S. data Thurs seen showing crude build, gasoline draw
(Updates prices, adds Brent crude)
By Chua Baizhen
SINGAPORE, Sept 3 (Reuters) - Oil dropped more than $1 to
below $109 on Wednesday, deepening this week's sharp fall as
traders looked past Hurricane Gustav to focus on a wobbly
global economy and the gloomy outlook for energy demand.
Oil has tumbled more than $6 since Friday, touching its
lowest in five months after early signs that a weakened Gustav
caused little damage to U.S. oil installations.
U.S. crude <CLc1> fell 87 cents to $108.84 a barrel by 0641
GMT, after settling on Tuesday at $110.15, below its 200-day
moving average for the first time since May 2007. It had hit a
low of $108.51 earlier on Wednesday.
Technical traders say the break of that key support level
could contribute to a deeper decline, extending oil's nearly
$40 a barrel slump since its July 11 record high of $147.27.
London Brent crude <LCOc1> slid 74 cents to $107.60, after
falling to as low as $107.25.
Although it may be days before energy companies are able to
fully assess and restore the one-third of U.S. refining
capacity and one-quarter of oil output that was shut as a
precaution, many oil traders had already turned their attention
elsewhere.
"It's the economy, economy, economy. Everyone's worried
about demand destruction," said Robert Nunan, a risk management
executive at Tokyo-based Mitsubishi Corp.
"The market is bearish short- to medium-term, although it has
been supported by other factors such as the hurricane and the
situation in Russia and Georgia," he said.
Signs of slowing oil consumption in major developed
economies have undermined the fundamental argument that booming
Asian giants such as China and India are straining oil
supplies, while a rebound in the dollar over recent months has
prompted many funds to unwind their
short-dollar/long-commodities trades.
The dollar rose to an 11-month high against a basket of
major currencies on Wednesday, on a souring global economic
outlook.
STORM FEARS EASE
The risk that Gustav could be a repeat of 2005's Hurricanes
Katrina or Rita, which wrecked over 100 offshore oil platforms
and shut several major refineries for months for repairs,
helped stem oil's decline last week, but support has since
evaporated.
With early inspections turning up little to no damage to
the facilities, the International Energy Agency, which had been
prepared to release emergency oil stocks in the event Gustav
caused severe damage, said it saw no need for emergency
supplies.
The U.S. Government said on Tuesday it would grant Citgo
Petroleum Corp's request for 250,000 barrels of crude oil from
the Strategic Petroleum Reserve. It is the only company so far
to ask for emergency supplies. []
Some traders are casting a nervous eye on Tropical Storm
Hanna, which may possibly strike the U.S. East Coast, while
Hurricane Ike continued westward across the Atlantic and was
projected to be in the vicinity of the Bahamas by Sunday.
Attention will turn on Thursday to U.S. oil inventory data
expected to show a 100,000-barrel increase in crude oil stocks,
a 1.3 million-barrel drawdown in gasoline supplies and a
500,000-barrel build in distillates in the week to Aug. 29.
[]
But the data, released a day later than usual due to
Monday's public holiday, will not capture most of the supply
disruptions caused by Gustav, analysts said.
(Editing by Ramthan Hussain)
