Oil fell in New York after Standard & Poor’s lowered the U.S. credit rating from the highest level, stoking concern an economic slowdown will worsen and cut fuel demand in the world’s biggest crude consumer. Futures dropped as much as 4.3 percent, trading close to the lowest intraday price in more than eight months. S&P cut the U.S.’s AAA rating to AA+ on Aug. 5 in response to a deal by President Barack Obama and lawmakers to raise the government’s $14.3 trillion debt limit. Hedge funds reduced bullish bets on crude by the most in more than six months, data showed last week. “Oil will remain soft while optimism is dashed and consumer confidence is under pressure,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who kept his forecast for New York crude to average $100 a barrel this year. “There’s a little bit of carnage, there’s no doubt. It’s just overkill at the moment, a knee-jerk reaction.” Crude for September delivery fell as much as $3.70 to $83.18 a barrel in electronic trading on the New York Mercantile Exchange. It was at $83.85 at 2:58 p.m. Singapore time. The contract rose 25 cents to settle at $86.88 on Aug. 5 after slipping to $82.87, the lowest intraday price since Nov. 26. Prices declined 9.2 percent last week, the most in three months, and are down 8.9 percent in 2011. Brent oil for September settlement on the London-based ICE Futures Europe exchange dropped as much as $3.58, or 3.3 percent, to $105.79 a barrel. The European benchmark contract was at a premium of $22.67 to U.S. futures, matching the record close on Aug. 2. Relative Strength Oil in New York may halt its decline as the relative strength index extends a drop below 30, signaling the market has fallen too much, too fast, according to data compiled by Bloomberg. Today’s reading of 23.87 is the lowest since May 2010, when futures reached a 10-month low before rebounding 16 percent in five weeks. Group of Seven nations said they will take action to stabilize financial markets after the U.S. sovereign-rating cut as a slump in Italian and Spanish debt intensified threats to the global economy. “While the U.S. downgrade is dominating headlines, troubles in Europe are also undermining markets,” economists at Australia & New Zealand Banking Group Ltd., led by Warren Hogan, said in a note today. The bank estimates oil will average $100 a barrel in the third quarter. “Progress in dealing with the euro-zone sovereign debt remains painfully slow.” Goldman Sachs Group Inc. maintained its 2012 forecast for Brent crude to average $130 a barrel and recommended investors hold a “long” trading position on December 2012 contracts, New York-based analyst David Greely said in an e-mail today. Hedge funds and other large speculators cut wagers that crude will rise in the week ended Aug. 2 by 16 percent, the most since Jan. 25, according to the U.S. Commodity Futures Trading Commission’s weekly report. Futures dropped 5.8 percent in New York in the period covered by the data. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Jane, Ching Shen Lee at jalee@bloomberg.net

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