Oil falls, set for biggest weekly drop since January

Oil prices dropped nearly $1 to below $60 a barrel yesterday, set for the biggest weekly fall since January as economic concerns sent investors seeking safer havens.

US crude fell 98 cents to $59.43 a barrel by 12.39 p.m. EDT (1639 GMT), while London Brent crude traded down $1.05 to $60.05 a barrel.

Mounting worries that a rebound in the global economy may not be coming soon to help spur flagging fuel demand has sent prices down about 10 per cent this week, falling in six of the last seven trading sessions.

"The mood has changed and people are losing confidence about the economic recovery," said Simon Wardell at Global Insight. "We are in one of those phases where no matter what happens in other markets, oil will go down."

US consumer sentiment wilted in early July to the weakest since March, the Reuters/University of Michigan Surveys of Consumers showed, adding to the recession worries.

The report helped drag down US stocks and helped push up the dollar and the yen, traditional safe-haven plays when risk aversion grows.

Investors have also been cautioned by moves by the US government to reign in speculation in energy and metals markets.

Bart Chilton, a commissioner for the US Commodity Futures Trading Commission said the agency would move aggressively and could implement new rules by late October and November.

A report by the International Energy Agency forecast demand would shrink this year but predicted oil consumption would grow by 1.7 per cent in 2010, led by rising use in emerging economies as the developed world recovers from recession.

Slumping demand helped push up fuel inventories in top consumer the United States last week, according to a US government report released on Wednesday, with distillate stockpiles hitting near 25-year highs.