* Oil dives to seven-month low on economic turmoil
* Several offshore U.S. oil platforms toppled by Ike
* Markets await U.S. Federal Reserve rate decision
(Updates prices, details, recasts, changes dateline from
LONDON)
By Richard Valdmanis
NEW YORK, Sept 16 (Reuters) - Oil prices dropped another 4
percent on Tuesday, extending their steepest two-day slide since
2004 as mounting economic turmoil sent investors fleeing to safer
havens.
The losses came despite U.S. supply disruptions after Hurricane
Ike crashed through the Gulf of Mexico last week and left a quarter
of the nation's energy output idled.
"People are getting out of commodities and getting into safer
havens, like bonds," said Andy Lebow, broker at MF Global in New
York.
U.S. crude <CLc1> for October traded down $4.86 to $90.85 a
barrel by 1722 GMT, adding to losses of more than $5 on Monday.
Prices have dropped more than 10 percent in two days, the biggest
slide since Dec. 2, 2004.
Brent crude <LCOc1> fell $5.01 to $89.23 a barrel.
"If the economic turmoil continues, demand will continue to
drop," said Jonathan Kornafel, Asia Director at U.S.-based options
trader Hudson Capital Energy. "It's a bit of panic in the markets."
Slowing demand in the United States and other top consumer
nations has sent crude prices tumbling from record highs over $147 a
barrel in July.
Monday marked the worst day on Wall Street since markets
reopened after the Sept. 11 attacks, with investors fleeing to safer
havens, such as gold, after news of Lehman Brothers' <LEH.N>
bankruptcy and the sale of Merrill Lynch <MER.N>.
Growing problems at insurer American International Group <AIG.N>
added to fears about the financial sector's stability and the
outlook for the global economy.
"If AIG tanks, that will be the big one. AIG has more to do with
the oil price right now than the Saudis do," said Larry Grace, an
analyst at Kim Eng Securities in Hong Kong.
European shares fell on Tuesday amid concerns over AIG, driving
up the yen and government bonds.
Federal Reserve policy-makers are expected to stop short of
lowering U.S. interest rates at a meeting on Tuesday but could
signal readiness to cut them quickly if needed to protect the
economy from one of the most serious financial crises in decades.
[]
Oil prices dropped even as reports came in that Hurricane Ike
toppled several oil and natural gas production platforms in the Gulf
of Mexico, signaling that a full recovery of output from the region
could be slow. []
Threats from hurricanes since late August have already cut more
than 20 million barrels of oil supply from the Gulf and idled a
quarter of the U.S. refinery capacity -- digging into supplies and
sending gasoline prices up at the pumps.
U.S. gasoline stockpiles are already running at their lowest
level since November 2000, and could drop to their lowest on record
due to the effects of Ike, according to a Reuters poll of analysts
on Monday. []
(Reporting by Richard Valdmanis; Additional reporting by Alex
Lawler, Santosh Menon and Matthew Robinson in London; Tom Miles in
Hong Kong and Annika Breidthardt in Singapore; Editing by Marguerita
Choy)
