Oil falls 7 percent on U.S. demand drop, stock build

By Edward McAllister

NEW YORK (Reuters) - Oil dropped 7 percent to below $66 a barrel on Wednesday after a U.S. government report showed fuel stockpiles growing as demand in the world's top consumer slowed further.

U.S. crude settled down $5.23 to $65.30 a barrel while Brent crude lost $4.57 to settle at $61.87 a barrel.

U.S. gasoline stocks rose by 1.1 million barrels last week, against analyst forecasts of a draw, as demand for the fuel fell 2.3 percent over four-week period to October 31, the Energy Information Administration said.

"The data looks bearish on most fronts with product supplies building more than expected as refinery activity held firm at the prior week's level," said energy analyst Jim Ritterbusch.

Crude prices have tumbled by about half from a record high of $147.27 a barrel in July as the global credit crisis hit the wider economy, damping fuel demand in major consumer nations.

U.S. stocks fell as worries about the weakening global economy returned to the fore, a day after the U.S. presidential election.

Democrat Barack Obama's first day as president-elect was marked by reports of deep cuts in employment by private employers, possibly foreshadowing weakness in the government's employment report on Friday.

Oil had surged $6.62, or 10.36 percent, on Tuesday, the largest one-day gain since September 22, on signs Saudi Arabia and other OPEC members had made cuts in oil exports, in compliance with an agreement last month aiming to stem the slide in oil prices.