Oil falls sharply as economic gloom spreads
The price of crude oil falls more than $10 a barrel before recovering slightly, as concerns about weakening demand roil the market.
The darkening gloom that hangs over the U.S. economy spread to the oil markets today, sending the cost of crude down for a time more than $10 a barrel from highs reached in early trading.
Light, sweet crude oil for August delivery traded at more than $146 a barrel in the overnight electronic session before plunging and then recovering slightly. In afternoon trading on the New York Mercantile Exchange, oil was selling for about $138, down more than $7 from Monday's close. Oil hit a record high of $147.27 on July 11 and has seen large price swings -- both up and down -- in recent weeks.
The sharp drop came as Federal Reserve Chairman Ben S. Bernanke testified before Congress that the nation's banking system was teetering amid "a potential banking run which we have not seen since the Great Depression."
That image was reinforced by images Monday and today at failed IndyMac Bank, where customers braved blocks-long lines to withdraw money from the Pasadena-based institution, which was seized by regulators late last week.
With the U.S. economy swooning toward a recession, or perhaps depression, demand for oil is sure to take a hit, analysts said.
Still, oil prices could take another dramatic turn at any time, Tom Kloza, chief oil analyst at the Oil Price Information Service, told clients in a note today.
elizabeth.douglass@latimes.com
