Oil falls 1.4 percent as Wall Street drags

NEW YORK (Reuters) - Oil prices dropped 1.4 percent on Wednesday as gloom on Wall Street outweighed the impact of a government report showing a surprise drop in U.S. crude and gasoline stockpiles.

U.S. crude fell 83 cents to settle at $58.02 a barrel, off a six-month peak above $60 hit earlier this week. London Brent fell 60 cents to $57.34.

The losses came as worse-than-expected U.S. retail sales data blurred the economic outlook and plunged U.S. stock markets more than 2 percent. <.N>

Oil prices have been tracking equities markets closely in recent months as traders look to stocks for signs of an economic recovery that could lift ailing world fuel demand.

Industrial consumption of oil in the United States, the world's top energy user, continues to drop and probably will not recover until late this year or early 2010, the chief executive officer of oil major BP Plc <BP.L> said Wednesday.

Adding to bearish sentiment, the Organisation of the Petroleum Exporting Countries forecast that world oil demand in 2009 would be even weaker than previously thought.

Oil's losses came despite a report from the U.S. Energy Information Administration showing U.S. crude inventories fell by 4.7 million barrels, defying expectations for a 10th straight weekly build. <EIA/S>

"The amazing run over the last months on building crude stocks had to come to an end," said Phil Flynn, analyst at Alaron Trading in Chicago.

Oil has plunged from a record high above $147 a barrel hit last July, but a rally in stock markets during the last few months has helped lift crude almost 80 percent from a January low of $32.70 a barrel.

(Reporting by Richard Valdmanis; Additional reporting by Bernie Woodall and Robert Campbell in LaJolla, Robert Gibbons and Gene Ramos in New York, Alex Lawler in London and Jennifer Tan in Singapore; Editing by Marguerita Choy)

Article Published: 13/05/2009