Oil prices fall amid demand fears

Oil prices fell for a third straight day today amid worries that the global economy is heading for recession, which could cut demand for crude.

Economies around the world are at risk of stalling, and that has punished prices of stocks and commodities.

US political leaders are embroiled in a stand-off that could force the government to shut down, a manufacturing survey suggested a slowdown in China, and Europe has not solved its banking crisis.

Moody’s downgraded eight Greek banks because of the country’s deteriorating economy. The concern is that a Greek default could hurt other nations in Europe and beyond.

When the economy slows, so does demand for oil.

“People are just afraid that demand is going to be affected in a negative way and that’s pulling prices back down,” said Tom Bentz, an analyst at BNP Paribas Commodity Futures.

After a broad decline the day before, stock markets today wavered between small gains and losses, while many commodities – including gold – continued to drop.

A day after it plunged more than 6%, Benchmark US oil fell 42 cents to $80.09 per barrel in afternoon trading. The price of oil is still about $5 a barrel more than a year ago. Analysts expect it to stay between $75 and $90 per barrel until there is a better picture of what lies ahead for the global economy.

US benchmark oil hit $113.93 a barrel on April 29. But high unemployment in the US – the world’s biggest oil consumer – and signs of a slowing economy in China – the second largest oil consumer – pulled crude down.

Brent crude, which is used to price many kinds of oil produced overseas, fell 61 cents to $104.88 per barrel.