Oil fell to the lowest in more than 10 months in New York and dipped below $100 a barrel in London as the U.S. credit-rating cut and rising stockpiles stoked concern a slowing economy will reduce demand for fuel. Prices in New York traded at about $80 as stock markets in Europe and Asia extended losses. Yesterday 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 futures have dropped about 20 percent from this year’s peak, one definition of a “bear market.” “There’s potential for oil prices to go lower along with rising risk aversion and concerns about global growth,” said Eliane Tanner, an analyst at Bank Sarasin & Cie AG in Zurich, who predicts that in an “extreme case” Brent may fall to $80 a barrel. The bank is currently reviewing its forecast of $115 for average Brent prices in the fourth quarter. “It’s pretty hard for commodities to avoid all the negative sentiment.” 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 price since Sept. 29. It was at $78.90 at 9:27 a.m. London time. Prices have fallen 3.3 percent in the past year. Brent oil for September settlement was down $2.24 at $101.50 a barrel after slipping as much as $5, or 4.8 percent, to $98.74 on the London-based ICE Futures Europe exchange. It’s the first time Brent has fallen below $100 since Feb. 8. The European benchmark contract was at a $22.66 premium to U.S. futures, after earlier reaching an intraday record of $23.76. Increased Volatility New York futures have tumbled 30 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 61.57 percent at 8 a.m. London time, 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 Stoxx Europe 600 Index slid 2.8 percent to 222.54 at 9 a.m. in London. The MSCI Asia Pacific Index slid 2 percent today, while Standard & Poor’s 500 Index futures rose 0.3 percent. China’s inflation accelerated to the fastest pace in three 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 U.S. 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 Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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