Oil falls below $54 as economic gloom deepens

By Ikuko Kao

LONDON (Reuters) - Oil's decline deepened to below $54 a barrel on Wednesday, pressured by economic weakness that will further erode the world's demand for fuel.

U.S. crude fell to $53.30 a barrel, its lowest since January 2007, and by 1:11 p.m. GMT was trading 61 cents lower at $53.78. Oil has dropped by nearly two-thirds from a record above $147 a barrel in July.

London's Brent crude was off 54 cents at $51.30.

"With no end in sight for the global economic turmoil, traders continue to focus on the lack of demand heading into 2009," said Jonathan Kornafel, Asia director of U.S.-based options trader Hudson Capital Energy.

"It is becoming quite evident that demand may actually drop from 2008 to 2009."

The oil market was also closely watching U.S. weekly oil data due out at 3:35 p.m. GMT on Wednesday as well as any moves from the Organisation of the Petroleum Exporting Countries (OPEC) at their meeting next week.

Analysts in a Reuters poll expected the U.S. oil data would show an increase of 800,000 barrels of crude stocks, and a 400,000 barrel rise in gasoline inventories. Distillate stocks, which include heating oil and diesel, were forecast to have risen 600,000 barrels.

The American Automobile Association (AAA) motor group said on Tuesday that U.S. travel for the upcoming Thanksgiving holiday next week would decline for the first time since 2002.