* Oil ends two-day rally, falls back towards 20-month low
* Signs of recession reverse China stimulus boost
* Global stock markets slide
* Dollar slightly firmer
(Recasts with detail, prices throughout)
By Christopher Johnson
LONDON, Nov 11 (Reuters) - Oil prices tumbled on Tuesday as
a slide in global stock markets refocused attention on the
prospect of widespread recession, which is likely to cut deep
into oil demand in many developed economies.
U.S. light, sweet crude <CLc1> for December delivery fell
$2.74, or 4.4 percent, to $59.66 a barrel by 1238 GMT.
London ICE Brent crude <LCOc1> fell $2.56, or 4.35 percent,
to $56.52.
"The oil market is coming down into line with demand
expectations," said Simon Wardell, oil analyst at Global Insight
in London.
"There's more downside weakness here than upside strength.
We are expecting prices to go lower before they go higher with
U.S. crude hitting $50 before its reaches $65 again."
Economists are gradually readjusting their expectations for
oil demand in the light of the accelerating slowdown in the
United States and Europe and some say a contraction in worldwide
oil demand is possible next year.
Many analysts are expecting a big drop in consumption in the
developed economies next year and most suggest that a further
rise in demand in developing economies just about offsets that
fall in demand. But some economists are now talking about a fall
in global oil demand in 2009.
"If we start seeing that, we really are dealing with a major
surplus in supply and oil prices will come under heavy
pressure," said Wardell.
INVENTORIES
The recent fall in prices and signs of falling demand are
encouraging oil consumers and refiners to keep their stocks low
and even get rid of inventory, keeping prices in contango, with
oil to be delivered soon much lower than forward futures prices.
Traders said the slide in oil prices began in very early
trading as falls in U.S., Asian and then European stock markets
drew investors' attention away from China's $600 billion
economic aid package.
"I think people got a little carried away yesterday with the
Chinese fiscal package and the impact it may have on oil prices
and after a morning rally reality set in," said Robert Laughlin
at MF Global in a research note on Tuesday.
World stock markets slumped with European stocks tracking
losses in the U.S. and Asia []
On Monday, oil prices closed 2 percent higher, recovering
from a mid-session fall of $59.10 a barrel, the lowest in nearly
20 months. Oil has shed 60 percent of its value since hitting a
record high $147 in July.
In the United States, the latest weekly inventory data is
likely to show rising stockpiles as demand remains weak, traders
and analysts said.
Crude oil stocks were expected to have risen by 800,000
million barrels last week, while distillate stocks should rise
by 500,000 million barrels and gasoline by 800,000
million-barrels, a preliminary poll of analysts showed.
The data will be released on Thursday this week, a day later
than usual due to Tuesday's national holiday.
(Additional reporting by James Topham and Jonathan Leff;
Editing by James Jukwey)
