Oil down on demand concerns

By Rebekah Kebede

NEW YORK (Reuters) - Oil prices were lower on Wednesday as concerns about the impact of the global financial crisis on demand and rising U.S. inventories outweighed a move by central banks to cut interest rates.

Earlier, oil prices had dropped to a fresh 10-month low, but pared some losses when U.S. stocks rose after five sessions of losses.

News that OPEC members were considering an emergency meeting in November to discuss the impacts of the financial crisis on oil demand also underpinned prices.

U.S. crude settled at $88.95 a barrel, down $1.11. London Brent crude settled at $84.36 a barrel, down 30 cents.

"We've fallen to a new low for crude prices this year on the latest inventory report and amid the raging credit crisis," said Phil Flynn of Alaron Trading in Chicago.

"In the past, whenever there was a credit crisis, investors bought oil as a hedge. But that has changed now, because everybody is realizing that the current credit crisis is weakening economies and that's a big problem that will hurt demand."

U.S. crude inventories rose 8.1 million barrels last week as they recovered from storm disruptions, according to the U.S. Energy Information Administration's weekly report. The rise was much more than the 2.3-million-barrel build forecast by analysts in a Reuters poll.

The EIA report also showed gasoline stocks increased 7.2 million barrels, compared with forecasts for a 1.1-million-barrel build, while total demand for products over the past four weeks dropped 8.6 percent compared with a year ago.