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Oil falls below $70 on US inventory build

LONDON - Oil fell below $70 a barrel for the first time since August last year after the U.S. government data showed larger than expected increases in crude and gasoline inventories and weaker product demand.

Crude oil inventories in the United States rose 5.6 million barrels last week, the government data showed, compared with analysts' expectation of a 1.9 million barrel increase.

Gasoline inventories rose 7.0 million barrels against analysts' forecast of a 2.9 million barrel increase.

"It is decidedly bearish. It pushed crude below $70 a barrel, and the 7 million gasoline build was just a whopper," said Jim Ritterbusch, president of Ritterbusch & Associates.

U.S. crude fell more than $5 at one point, sliding to as low as $69.15, the cheapest price since August last year. It was trading $4.75 lower at $69.92 by 1532 GMT.

London Brent crude also fell more than $5 to $65.70, the lowest since May.

U.S. crude has fallen from its record highs above $147 hit in July and it has lost nearly a third in value in three weeks, the steepest such decline since it began trading in 1983.

Total oil product demand in the past four weeks fell 8.9 percent from a year earlier.

A separate data from the Federal Reserve showed U.S. industrial production posted the biggest monthly decline since 1974.

"Economic weakness is hitting the stock and oil markets, but the oil price fall is also reflecting a lack of demand. It is very difficult to buy oil if you are having a hard time getting credit lined up," said Francisco Blanch, head of commodity research at Merrill Lynch.

Analysts have scaled back global oil demand growth estimates after a slew of gloomy economic data that suggest the credit crisis has begun to undermine economic growth in the United States, the world's top energy consumer.

OPEC

The Organization of the Petroleum Exporting Countries (OPEC) said on Thursday it had brought forward an emergency meeting to discuss the impact of global recession on oil markets to Friday next week.

Pressure has been mounting within the 13-member group to reduce supplies. There are expectations it may take action to support prices.

Nigerian Oil Minister Odein Ajumogobia said the emergency OPEC meeting was an opportunity to consider options regarding the world oil price but that no course of action had yet been proposed.

"I regard it as an exploratory meeting to review facts and options. Not even tentative proposals have been discussed at this stage," Ajumogobia told Reuters.

Hurricane Omar, which disrupted shipments from Venezuela this week, strengthened into a major Category 3 storm on Thursday as it headed toward Puerto Rico and the northeastern Caribbean, but was on a northeast trajectory away from the U.S. Gulf, the National Hurricane Center said.