Oil falls nearly $2 on weak demand

By Edward McAllister

NEW YORK (Reuters) - Oil fell nearly $2 on Friday as weak demand and the global economic crisis put crude on track for the biggest monthly drop ever.

U.S. crude fell $1.82, or almost 3 percent, to $64.14 a barrel by 12:00 p.m. EDT (4 p.m. British time). It is down by around 35 percent for October, its steepest monthly decline to date as demand in the United States and other big consumer nations slows.

London Brent crude traded down $1.98 to $61.73.

The U.S. Commerce Department reported that American consumers cut spending for the first time in two years in September, as confidence drained.

This coincided with data released on Thursday which showed that U.S. gross domestic product contracted at an annual rate of 0.3 percent for the third quarter.

It was the sharpest economic decline in seven years for the United States, the world's largest oil consumer, provoking further falls across commodities and global stock markets, also poised for their worst month yet.

A stronger U.S. dollar, which makes dollar-denominated assets less attractive to buyers, further pressured commodities.

"It could even take a large part of 2009 before we see an increase in demand again," said Peter Beutel, president of trading consultants Cameron Hanover in Stamford, Connecticut.