*Oil falls over 5 percent
*U.S. factory activity falls to 26-year low
*Banks worldwide feel punch of credit crisis
By Edward McAllister
(Updates throughout, changes dateline to NEW YORK)
NEW YORK, Nov 3 (Reuters) - Oil fell over 5 percent on
Monday as further indicators of falling global demand linked to
a potential recession offset OPEC plans to reign in output.
U.S. crude <CLc1> fell $3.65 to $64.16 a barrel by 12.57
EST (1757 GMT). London Brent crude <LCOc1> dropped $4.18 to
$61.14.
U.S. factory activity -- a barometer for future oil demand
-- contracted sharply in October, falling to its lowest in 26
years as the financial crisis racked the world's largest
economy. []
The Institute for Supply Management said its index of
national factory activity fell to 38.9 in October from 43.5 in
September. A reading below 40 is exceptionally weak.
"The most devastating blow for crude oil today is data
showing that U.S. manufacturing activity in October fell to the
lowest level in 26 years, which means more worries for oil
demand," said Phil Flynn, an analyst at Alaron Trading, in
Chicago.
"Manufacturing used to be a great forward indicator for oil
demand, but if the manufacturing sector is down, it will be a
struggle to keep oil demand up," he added.
Profits evaporated at leading banks on Monday and
authorities worldwide pressed on with efforts to temper a
recession that policymakers said had become reality for much of
the globe. []
French Bank Societe Generale reported an 83.7 percent drop
in third-quarter net profit and Germany's second largest bank
Commerzbank said it would take an 8.2 billion euro capital
injection from the state and another 15 billion to secure
refinancing.
Ford Motor Co's <F.N> U.S. sales for October were down 30.2
percent on last year, with Chrysler, Nissan and Volvo all
reporting slumps year on year.
Analysts said traders would now be looking for signs that
Saudi Arabia was cutting back its crude production in line with
OPEC's agreement in October to reduce output by 1.5 million
barrels per day (bpd).
October saw the steepest monthly price decline ever for oil
as global demand slowed.
In three months, oil has wiped out gains that took more
than a year to build. It is down more than half since prices
struck a record $147.27 a barrel on July 11, as poor economic
data added to pressure from weak demand reports in the United
States and other key consumer nations.
Societe Generale said on Monday it had lowered its oil
price forecasts as global oil demand was likely to weaken
further. The bank expects U.S. crude to average $72.50 a barrel
next year. Its previous forecast was $114.17. []
OPEC members have no choice but to implement agreed output
cuts and inform customers of the reductions if they want a
stable oil price between $70 and $90 a barrel, OPEC President
Chakib Khelil said on Sunday.
Khelil said Saudi Arabia was the key to the success of the
reductions, and if the world's biggest oil exporter took its
time over the operation, the oil price could be affected.
[]
(Additional reporting by Robert Gibbons and Gene Ramos in New
York, Alex Lawler and Ikuko Kao in London and Fayen Wong in
Perth; Editing by Christian Wiessner)
