Oil plummets on big jumps in crude, gas inventories

NEW YORK -- Oil prices that a few months ago looked like they would just keep rising fell Thursday to less than half their record reached in July.

Light, sweet crude for November delivery dropped $4.69, or 6.3%, to settle at $69.85 a barrel on the New York Mercantile Exchange, the lowest settlement price since Aug. 23, 2007. On July 11, crude set a record, selling for $147.27 a barrel.

Prices dropped after the government reported massive increases in U.S. crude and gasoline supplies. Investors took the news as more evidence that a global credit crisis and a shaky economy are curbing demand for oil.

A gallon of regular gasoline shed 4 cents overnight to a national average of $3.084, according to auto club AAA, Oil Price Information Service (OPIS) and Wright Express. At this rate, the national average for gasoline could fall below $3 by the weekend, a level not seen since Feb. 16.

"It's dropping like a rock," said Fred Rozell, retail pricing director at OPIS.

Startled by crude's rapid drop, OPEC on Thursday announced it was moving up by almost a month an emergency meeting to discuss whether a production cut is needed. The Organization of Petroleum Exporting Countries will now meet Oct. 24 at its headquarters in Vienna, instead of Nov. 18. Oil market traders ignored the statement, convinced that prices are headed lower.

Demand for gasoline over the four weeks ended Oct. 10 was 5.2% lower than a year earlier, the U.S. Energy Information Administration said in its weekly report.

"This report is playing right into the market's deepest fears, that the economy is slowing down and that demand is going to be non-existent," said Phil Flynn, analyst at Alaron Trading in Chicago.

While U.S. energy supplies have been swelling because of falling demand, they've also grown as U.S. Gulf Coast energy installations continue to increase production after shutdowns caused by Hurricanes Ike and Gustav.