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Oil falls to $62 on gloomy global economic outlook

SINGAPORE - Oil prices fell to 17-month low around $62 a barrel Tuesday in Asia on investor concerns a global economic slowdown could worsen, further undermining demand for crude.

Light, sweet crude for December delivery fell 87 cents to $62.35 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore after trading as low as $61.75. The contract fell overnight 93 cents to close at $63.22, the lowest settlement since May 29, 2007.

It's quite a severe slowdown that's been priced in already," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. I thought in June and July the only way we would get below $80 was if there was a macroeconomic collapse, and it seems that that's what we're seeing."

Oil investors have been taking a cue from a plunge in global stock markets that suggests major economies are headed for a significant recession over the next 12 months. Oil prices have fallen 58 percent since reaching a record $147.27 on July 11.

The Dow Jones industrial average fell 2.4 percent Monday after credit ratings agency Moody's Investors Service downgraded General Motors Corp.'s credit rating further into junk" status, citing a sharp contraction of the U.S. auto market. The Standard & Poor's 500 index fell 3.2 percent.

In early trading on Tuesday, Asian stock markets were mixed, with key indices in Japan and Australia down but Hong Kong and Thailand gaining after both of those markets fell more than 10 percent Monday.

If the credit market remains tight and the recession worsens, we could certainly go into the $50s and even below $50, but that would be an overshoot to the downside," Kornafel said.

Prices have fallen despite a production quota cut of 1.5 million barrels a day by the Organization of Petroleum Exporting Countries last week. OPEC officials have said the group, which controls about 40 percent of global crude oil production, may cut output again at a meeting in December.

It doesn't matter what OPEC does or other supply news, people are just so focused on demand and getting their money out of trades that no longer make money," Kornafel said. There's no real attention being paid to fundamentals in the short-term. It's still the panic."

In other Nymex trading, gasoline futures fell 1.68 cent to $1.46 a gallon and heating oil fell 0.28 cent to $1.91 a gallon. Natural gas for November delivery fell 1.8 cents to $6.10 per 1,000 cubic feet.

In London, December Brent crude was down $1.21 to $60.20 a barrel on the ICE Futures exchange.