Oil falls to 20-month low
Crude investors worry that sluggish economic growth could hurt demand.
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| Click the chart to track the latest commodity prices. |
NEW YORK (CNNMoney.com) -- Oil prices continued to decline Thursday as concerns about slowing demand mounted and the sluggish global economy hammered equity markets.
U.S. crude for December delivery ended the day down $4.53 to $60.77 a barrel in New York trading. The settle was the lowest since March 21, 2007, when crude ended trading at $59.61.
Investors have been looking to the world's stock markets for a read on the health of the global economy, and the demand for fuel and other petroleum products that goes along with it.
"It would make sense to watch equities because that's a daily read on economic expectations," said James Williams, president and energy economist at WTRG Economics in Arkansas.
Demand: Concern about falling demand has been a major factor in oil's fall from a record $147.27 a barrel on July 11.
Gasoline prices, which peaked at $4.114 a gallon at the pump a few days later, soon followed. By Thursday, gas prices had declined to a national average of $2.34 a gallon, according to motorist group AAA.
Demand for gasoline was down 3.9% last week, compared to the same period last year, according to MasterCard's weekly survey of gas station credit card swipes.
The U.S. Department of Energy also said that gasoline demand was down 2.3% over the past four months compared to last year.
World declines: Equities around the world resumed their decline Thursday, with stocks in Germany, France and the U.K. falling about 3%, and Japan plummeting more than 6%.
Decisions by the European Central Bank and the Bank of England to cut key interest rates in order to pump cash into the economies of Europe underscored the gravity of the economic downturn there.
The ECB cut its key interbank lending rate by one-half percentage point to 3.25%, while Britain's central bank cut rates by 1.5 percentage points to 3%, a much deeper cut than investors had expected.
"It's just another data point that reflects how severe this economic downturn looks like it could be," said Brian Hicks, fund co-manager at U.S. Global Investors in Texas.
Meanwhile in the United States, the Dow Jones industrial average shed more than 400 points in early afternoon trade, amid poor retail performance, and as doubts about the strength of U.S. automakers triggered concern that the country could face a prolonged recession.
Dollar: The rate cuts in Europe boosted the dollar against the 15-nation euro, which also helped drive down oil prices. Because oil and other commodities are traded in dollars, a rise in the dollar compared to other currencies makes oil more expensive for foreign investors and drives down its dollar-denominated price.
"It's just exactly the opposite of what happened last week when the Fed cut," said Williams.
The Federal Reserve cut its key interest rate last week, weakening the dollar and helping to send oil more than $4 higher. 
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