Oil headed for its biggest two-day plunge in more than two years in New York as the U.S. credit- rating cut and rising stockpiles stoked concern an economic slowdown will worsen, reducing demand in the world’s biggest crude consumer. Brent tumbled below $100 a barrel. New York futures fell to the lowest in more than 10 months as Asian stocks dropped for a sixth day. U.S. equities slumped the most since December 2008 in the first trading session since Standard & Poor’s Aug. 5 downgrade. An Energy Department report tomorrow may show crude inventories climbed for a third week. Brent oil traded in London slipped below $100 for the first time since Feb. 8. “Until we can see some confidence coming back to the U.S. consumer, the situation is probably not going to change that much in terms of another strong price rally,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who kept his forecast for New York crude to average $115 this year. “A recession would obviously have the potential to reduce consumption and that will place pressure on prices.” Crude for September delivery fell as much as $5.60, or 6.9 percent, to $75.71 a barrel in electronic trading on the New York Mercantile Exchange, the lowest intraday price since Sept. 29. It was at $77.90 at 2:19 p.m. Sydney time. Prices declined as much as 13 percent the past two days, the most since Jan. 8, 2009, and are down 4.4 percent the past year. Brent oil for September settlement was at $101.07 a barrel after slipping as much as $5.00, or 4.8 percent, to $98.74 on the London-based ICE Futures Europe exchange. The European benchmark contract was at a $23.12 premium to U.S. futures, compared with the record close of $22.67 on Aug. 2. Increased Volatility New York futures have tumbled 32 percent since reaching a two-year high of $114.83 in intraday trading on May 2. Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options prices, was at 68.7 percent at 3 p.m. in New York, up from 40.9 percent Aug. 5. Federal Reserve policy makers will hold a one-day meeting today as the removal of the top credit rating for the U.S. stokes speculation the nation is headed for a recession. S&P said it downgraded the country one level to AA+ because the agreement by President Barack Obama and congressional Republicans didn’t do enough to stabilize the government’s “medium-term debt dynamics.” “The way prices are falling, especially on stock exchanges, they are likely to keep falling until the Fed unveils some new program,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in an e-mailed note. “There are very few options available, but this is threatening to be a complete meltdown.” Equities Slump The MSCI Asia Pacific Index slumped as much as 5.5 percent. The Standard & Poor’s Index fell 6.7 percent to 1,119.46 at the 4 p.m. close in New York, its lowest since September, as all 500 stocks fell for the first time since Bloomberg began tracking the data in 1996. Japan’s Nikkei 225 Stock Average slumped 4.8 percent and Australia’s S&P/ASX 200 Index lost 5.5 percent. China’s inflation accelerated to the fastest pace in there years in July, restraining the government from easing monetary policy as risks to the global economy mount. Consumer prices climbed 6.5 percent from a year earlier, the Beijing-based National Bureau of Statistics said on its website today. The Energy Department report tomorrow may show crude oil supplies increased 1.5 million barrels in the seven days ended Aug. 5 as the government released barrels from the Strategic Petroleum Reserve, according to the median of eight analyst estimates in a Bloomberg News survey. Gasoline inventories probably climbed 900,000 barrels, the survey shows. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Jane Lee in Kuala Lumpur at jalee@bloomberg.net

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