SINGAPORE—Oil prices fell to $78 a barrel Wednesday in Asia on concern a massive bank bailout by the US and Europe won’t keep the global economy from slipping into a severe slowdown that would erode crude demand.
And stocks in Europe and Asia fell for the first time in three days, led by commodity producers, on speculation $2 trillion in funds for banks to rescue the financial system won’t be enough to avert a recession.
BHP Billiton dropped 2.8 percent and Royal Dutch Shell Plc slipped 1.6 percent as copper and oil retreated and Federal Reserve Bank of San Francisco president Janet Yellen said the US was in a recession.
Bayerische Motoren Werke AG sank 2 percent as European car sales slumped for a fourth straight month in September.
The MSCI World Index lost 0.3 percent to 1,019.77 at 8:05 a.m. in London, following the biggest two-day rally on record.
Europe’s Dow Jones Stoxx 600 Index declined 1.4 percent, while the MSCI Asia Pacific Index decreased 1.1 percent.
Light, sweet crude for November delivery was down 72 cents to $77.91 a barrel in electronic trading on the New York Mercantile Exchange by mid-day in Singapore. The contract fell overnight $2.56 to settle at $78.63.
“People are worried that the world economy is heading for recession,” said Gerard Rigby, an energy analyst at Fuel First Consulting in Sydney.
“The bailout may save the banks, but companies are still laying off workers and demand is going to suffer.”
The US planned to spend as much as $250 billion this year of a $700-billion bailout buying stock in private banks, President George W. Bush said Tuesday.
Governments across the globe have pledged more than $3 trillion to prop up ailing banks in a bid to stabilize a credit crisis that began last year in the US sub-prime mortgage market.
Former US Federal Reserve Chairman Paul Volcker said Tuesday the US and Europe faced a “considerable recession.”
“The banks might be OK, but the rest of the economy needs help as well,” Rigby said.
Investors are watching for signs of slowing US demand in the weekly oil inventories report to be released Thursday from the US Energy Department’s Energy Information Administration.
The petroleum supply report was expected to show that oil stocks rose 3.1 million barrels last week, according to the average of analysts’ estimates in a survey by energy information provider Platts.
The Platts survey also showed that analysts projected gasoline inventories rose 3.1 million barrels and distillates went down 850,000 barrels last week.
