Focus on economic weakness, falling demand

Oil prices fell on Wednesday to their lowest level in 13 months, dragged down by expectations that economic weakness will cut further into demand for crude.

U.S crude fell to $75.62 a barrel, the lowest price since September last year. By 1144 it had pared the loss and was trading $2.67 lower at $75.96. London Brent crude dropped by $2.58 cents to $71.95.

Stock markets also fell broadly and the U.S. dollar weakened against the yen as global recession fears returned to centre stage after governments around the world pledged trillions of dollars for bank bailouts.

Recession may further curtail oil demand in the world's top consumer the United States and other key markets.

"I can't see anything really to drive prices higher in the short term. At the moment, prices are just taking their time and trading in a tight range," said Peter McGuire, managing director of Commodity Warrants Australia.

Traders will closely watch weekly U.S. inventory data on Thursday for indications on U.S. oil demand. Analysts in a Reuters poll expect increases in crude and oil product products.

The data is forecast to show a 1.9 million barrel build in crude stocks, a 600,000 barrel build in distillates and a 2.9 million barrel rise in gasoline inventories last week. The oil price gained some limited support as the U.S. National Hurricane Center said Omar grew from a tropical storm to hit hurricane strength on Tuesday as it headed toward Puerto Rico and the small islands of the northeastern Caribbean.

The storm has disrupted a refinery in Venezuela and movements of some tankers.