* Oil dives to seven-month low on economic turmoil
* Several offshore U.S. oil platforms toppled by Ike
* U.S. Federal Reserve holds rates steady
(Updates prices with Brent settlement
)
By Richard Valdmanis
NEW YORK, Sept 16 (Reuters) - Oil prices dropped another 5
percent to a seven-month low on Tuesday, extending the 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 settled down $4.56 at $91.15 a
barrel, adding to losses of more than $5 on Monday. Prices have
dropped about 10 percent in two days, the biggest slide since
Dec. 2, 2004.
Brent crude <LCOc1> fell $5.02 to $89.22 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."
Monday marked the worst day on Wall Street since markets
reopened after the Sept. 11 attacks in 2001, with investors
fleeing to safer havens, such as gold and bonds, 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.
Slowing demand due to economic weakness in the United States
and other top consumer nations has sent crude prices tumbling
from record highs over $147 a barrel in July.
European shares fell on Tuesday amid concerns over AIG,
driving up the yen and government bonds. But a report that the
Federal Reserve was mulling a loan package for AIG trimmed
losses late in the day. []
Federal Reserve policy-makers stopped short of lowering U.S.
interest rates at a meeting on Tuesday, opting for the time
being to soothe rattled financial markets with central bank
lending facilities rather than rate cuts.
The slide in oil prices came despite reports 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 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. []
(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
Matthew Lewis)
