Oil dips 0.5 pct to $109

By Chua Baizhen

SINGAPORE (Reuters) - Oil dipped half a dollar to near $109 on Wednesday, deepening this week's sharp drop as traders looked past Hurricane Gustav to focus on a wobbly global economy and the gloomy outlook for energy demand.

Oil has tumbled more than $6 since Friday, touching its lowest in five months after early signs that a weakened Gustav caused little damage to U.S. oil installations.

On Wednesday, U.S. crude fell 52 cents to $109.19 a barrel by 0215 GMT after settling on Tuesday at $110.15, below its 200-day moving average for the first time since May 2007.

Technical traders say the break of that key support level could contribute to a deeper decline, extending oil's nearly $40 a barrel slump since its July 11 record high of $147.27.

London Brent crude slid 53 cents to $107.81.

Although it may be days before energy companies are able to fully assess and restore the one-third of U.S. refining capacity and one-quarter of oil output that was shut as a precaution, many oil traders had already turned their attention elsewhere.

"It's the economy, economy, economy. Everyone's worried about demand destruction," said Robert Nunan, a risk management executive at Tokyo-based Mitsubishi Corp.

"The market is bearish short- to medium-term, although it has been supported by other factors such as the hurricane and the situation in Russia and Georgia," he said.