Oil falls as recession fears drag down markets

By Matthew Robinson

NEW YORK (Reuters) - Oil prices fell on Tuesday to settle at a 22-month low as concerns about global economic weakness pushed down markets.

Uncertainty about the fate of talks over aid for General Motors Corp GM.N and other U.S. automobile makers fueled worries that helped send U.S. stocks lower.

U.S. crude settled down 56 cents at $54.39, the lowest settlement since January 29, 2007, erasing gains seen earlier in the day. London Brent crude fell 47 cents to settle at $51.84 a barrel.

"Crude oil futures moved down with Wall Street," said Andy Lebow, broker at MF Global.

"The oil market is in a major downtrend and moving down with equities confirms there is a lack of confidence in what brought prices up earlier."

The U.S. Treasury defended its handling of the financial bailout as American auto and banking woes reverberated around the globe. The International Monetary Fund said it would need rapidly increasing amounts of extra funding to fight the downturn.

Oil prices have dropped from record highs above $147 a barrel in July as the mounting economic crisis has clipped fuel demand in big consumer nations such as the United States.

The AAA motor group on Tuesday forecast U.S. travel for the upcoming Thanksgiving holiday next week would decline for the first time since 2002.