Oil falls below $78 on recession fears

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Singapore, October 15: : Oil prices fell to USD 78 a barrel on Wednesday in Asia on concern a massive bank bailout by the US and Europe won't keep the global economy from slipping into a severe slowdown that would erode crude demand.

Light, sweet crude for November delivery was down 72 cents to USD 77.91 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract fell overnight USD 2.56 to settle at USD 78.63.

"People are worried that the world economy is heading for recession," said Gerard Rigby, an energy analyst at Fuel First Consulting in Sydney. "The bailout may save the banks, but companies are still laying off workers and demand is going to suffer."

The US plans to spend as much as USD 250 billion this year of a USD 700 billion bailout buying stock in private banks, President George W Bush said on Tuesday. Governments across the globe have pledged more than USD 3 trillion to prop up ailing banks in a bid to stabilise a credit crisis that began last year in the US sub-prime mortgage market.

Former US Federal Reserve Chairman Paul Volcker said the US and Europe face a "considerablerecession."

"The banks might be ok, but the rest of the economy needs help as well," Rigby said.