Oil has huge collapse

NEW YORK (AP) - Oil prices ended the week with a modest rally Friday but couldn't erase one ugly October: Crude capped its biggest monthly drop since futures trading began 25 years ago, weighed down as a deflated U.S. economy crushes demand for fuel.

Oil's huge collapse — prices fell 32 percent for the month — has stunned oil-producing countries while giving cash-strapped U.S. consumers a rare dose of relief. Pump prices have fallen by about 40 percent since their summer peak above $4 a gallon, a drop that's expected to result in staggering annual savings for American households — well in excess of $100 billion.

After trading lower most of the day, oil prices staged a late-session surge on the back of a Wall Street rally. Oil investors have been tracking equity indexes as a barometer of global economic health. The Dow Jones industrial average rose 144 points.

Light, sweet crude for December delivery rose $1.85 to settle at $67.81 a barrel on the New York Mercantile Exchange, after earlier falling as low as $63.12.

Prices closed at $100.64 a barrel on the last trading day in September. That gives oil the biggest monthly slide since the launch of the Nymex crude futures contract in 1983. The previous record was a 30 percent drop set in February 1986.

Crude hit a record price of $147.27 set on July 11.

"We're seeing a huge paradigm shift," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "We went from $100 at the beginning of the month to around $65 today. It's quite a decline and shows how weak the demand picture really is."

In August, Americans drove 15 billion fewer miles than they had in the same month the previous year, the largest single month decline since World War II, when figures were first collected regularly.

Cheaper gas has been a rare bit of good news for consumers rattled by huge drops in the stock market, rising mortgage payments and difficulty in obtaining credit. According to Deutsche Bank research, for every dollar that comes off pump prices, U.S. households save a staggering $100 billion a year — money that can be spent on other goods and services to help jolt the economy.

The drop in oil has come despite moves by OPEC to prop up prices. Last week, the Organization of the Petroleum Exporting Countries announced plans to cut 1.5 million barrels of production per day at an extraordinary meeting in Vienna.