Crude futures continued to slide on Wednesday, falling to the lowest level in a 3-month period

In global petroleum industry news, crude futures continued to slide on Wednesday, falling more than $2 a barrel to a 3-month low on concerns that oil supplies are growing even as the economy and demand for oil are cooling. Light, sweet crude for March delivery fell $2.22 to settle at $86.99 a barrel on the NYMEX. Global stock markets have fallen sharply in recent days on fears that the US economy is on the brink of a recession, or has already entered one. Energy investors, who often view stocks as a proxy for economic growth, fear a slowdown would curb demand for crude and products. Meanwhile, the mid-week inventory is due out today. We expect crude stockpiles likely rose last week by 2 mn barrels. Supplies of gasoline and heating oil likely rose by 1.5 mn barrels, while we think distillates will be down 1 mn barrels. The Energy Department's Energy Information Administration will issue its weekly inventory report on Thursday this week, a delay of one day due to the Martin Luther King, Jr., holiday. If the numbers turn out in line with our expectations it will be a bearish report, which would spell more downside. On the economic front, the Federal Reserve's decision Tuesday to slash its benchmark fed funds rates by three-quarters of a percentage point to 3.5% has done little to limit declines in oil prices. While the Fed is widely expected to cut rates further next week, many investors remain worried about whether the cuts will stave off recession. Investors are also concerned that high energy prices may be contributing to the economic slowdown. In Cairo Wednesday, US Energy Secretary Samuel Bodman said high oil prices are beginning to take a toll on the economy. "The economy has been able to withstand it until now," Bodman said. "I believe the $100 price of oil is starting to have an impact." Oil rose as high as $100.09 a barrel earlier this month before retreating over 10% YTD on economic concerns. Looking ahead, we can see that the oil market has become quite sensitized to any move in equities and any renewal in upside is unlikely until the US economy gets back on track.