Crude oil tumbled to the lowest level since September after the Federal Reserve said risks to the economy have increased and didn’t announce asset purchases. Prices rebounded in electronic trading after the settlement. Oil fell 2.5 percent as Fed Chairman Ben S. Bernanke and his colleagues pledged to keep the benchmark interest rate at a record low through mid-2013 and said they are “prepared to employ” more tools “as appropriate.” Economists including Kenneth Rogoff, a Harvard University economics professor and former Fed researcher, had said the Fed was likely to start a third round of quantitative easing. “They didn’t do something that would have a tangible and immediate impact,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. “Without QE3 to sort of give a sentiment and capital boost to the markets, the negative economic news is going to be a bigger drag that could weigh on crude.” Oil for September delivery dropped $2.01 to $79.30 on the New York Mercantile Exchange, the lowest settlement since Sept. 29. Futures have fallen 17 percent in August and 13 percent this year. Prices advanced from the settlement after equities rose and the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles decreased 5.21 million barrels to 348.6 million. September oil rose 86 cents, or 1.1 percent, to $82.17 a barrel in electronic trading at 5:03 p.m. Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options prices, surged to 69.1 percent at 4 p.m. in New York from 61.5 percent yesterday and 33.1 percent a week ago. New York futures have tumbled 31 percent from a two-year high of $114.83 a barrel on May 2. Brent Falls Brent oil for September settlement fell $1.17, or 1.1 percent, to $102.57 a barrel on the ICE Futures Europe exchange in London, the lowest closing price since Feb. 18. The major stock indexes rose at least 4 percent after erasing losses in the last 75 minutes of trading. The Standard & Poor’s 500 Index rose 4.7 percent to 1,172.53, and the Dow Jones Industrial Average gained 4 percent to 11,239.77. “Economic growth so far this year has been considerably slower than the committee had expected,” the Fed statement said. The central bank also said it expects a “somewhat slower pace of recovery over coming quarters,” adding that “downside risks to the economic outlook have increased.” Fed policy makers acted after reports showed the economy was slowing and an unprecedented downgrade to the U.S. credit rating last week by Standard & Poor’s triggered a markets rout from Sydney to New York. Stimulating Demand “The market is concerned that the Fed isn’t going to do enough to stimulate demand for oil,” said Phil Flynn, vice president of research at PFGBest in Chicago “We’re not going to necessarily see a QE3 at this time, which is disappointing for the oil bulls.” Earlier today, the Energy Department cut its forecast for U.S. oil consumption in 2011 to 19.02 million barrels a day from last month’s forecast of 19.18 million in its monthly Short-Term Energy Outlook. Next year’s demand is projected to climb to 19.19 million. The U.S. is the world’s largest oil-consuming country. The U.S. also cut its price forecast for 2011 by 2.8 percent to $95.71 a barrel. OPEC Cuts Forecasts The Organization of Petroleum Exporting Countries cut its oil demand forecasts for this year and next as the global economic recovery loses momentum. The group reduced its 2011 consumption estimate by 150,000 barrels a day. That means global demand will rise by 1.2 million barrels a day, or 1.4 percent, to 88.1 million. Next year it will increase by 1.5 percent to 89.4 million, following a “minor downward revision,” the organization said in its monthly market report. The Energy Department boosted its global demand estimate to 88.19 million barrels, up from the previous 88.16 million. It predicted 2012 demand of 89.83 million barrels a day. Prices also dropped as U.S. oil supplies probably rose for a third week, adding 1.35 million barrels in the seven days ended Aug. 5 as the government released barrels from the Strategic Petroleum Reserve, according to the median of 12 analyst estimates in a Bloomberg News survey. The Energy Department reports tomorrow. Supply, Demand U.S. oil supply and demand fundamentals “remain firm,” even with the battery of negative economic news and as prices have fallen, Stephen Schork, president of the Schork Group Inc. energy advisory company in Villanova, Pennsylvania, said in a note to clients. He cited as evidence the shrinking spread between the September and October Nymex crude contracts, which was 37 cents today, the smallest differential since July 22. OPEC has no plans “so far” to hold an emergency meeting in response to recent price declines, said an OPEC delegate who isn’t authorized to speak publicly on the matter and declined to be identified by name. OPEC is worried about the global economy and falling demand, according to the delegate, who said the organization doesn’t have a specific price target that would trigger action. Oil volume in electronic trading on the Nymex was 972,849 contracts as of 5:03 p.m. in New York. Volume totaled 947,090 contracts yesterday, 40 percent above the average of the past three months. Open interest was 1.55 million contracts, the highest level since June 15. To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net. To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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