CORRECT: UPDATE:OIL FUTURES: Nymex Crude Dn As Equities Drop

NEW YORK --Crude futures dropped for the fourth straight trading day Tuesday, pressured by sliding equities and concerns about future oil demand.

Light, sweet crude for September delivery settled down $1.15, or 1.6%, at $69.45 a barrel on the New York Mercantile Exchange, the lowest settlement since July 31. Brent crude on the ICE futures exchange settled $1.04, or 1.4% lower, at $72.46 a barrel.

Crude prices have moved in tandem with equities for much of 2009, with oil traders viewing stock markets as a leading indicator for the economic activity that determines oil demand. On Tuesday, the Dow Jones Industrial Average spent most of the day lower, and was recently down 0.7% at 9271.

The dropping Dow heightened concerns about weak oil demand and rising inventories.

"There is a tension between hopes of an economic recovery and the reality of a steep contraction in demand" said Antoine Halff, an analyst with Newedge Group. "Demand has been collapsing faster than anyone expected."

Global oil demand in the current quarter is down 1.3% from a year earlier, the Department of Energy said Tuesday in its monthly Short-Term Energy Outlook. Inventories have been rising in the major industrialized nations, and would have covered 61 days of forward demand at the end of July, well above the five-year average level of 54 days. In the U.S., oil and product inventories have risen in the past five quarters - the longest streak in 30 years - and are poised to increase in the current quarter too, government analysts said.

Meanwhile, the Organization of Petroleum Exporting Countries said in its monthly report that output from its members rose in July for a fourth straight month, adding more extra crude to an already oil-saturated market.

The amount of oil stored in offshore tankers is rising again. Analysts with ICAP Shipping in London said that 29 tankers were being used to store crude oil worldwide as of last Friday, up from 26 a week earlier, and 24 on July 24. The number of tankers has increased as the front-month oil contract's discount to outer months has widened. The price pattern known in the industry as contango, illustrates that near-term supplies are abundant relative to demand.

Traders are waiting for U.S. inventory data published Wednesday by the Energy Information Administration. Analysts polled by Dow Jones expect U.S. crude oil stocks to rise by 700,000 barrels, gasoline stocks to fall by 1.3 million barrels and distillate inventories, including heating oil and diesel, to drop by 300,000 barrels. Refineries are expected to cut production by 0.2 percentage point to 84.3% of operable capacity.

Separate data published Tuesday by the American Petroleum Institute showed a 1.4-million-barrel drop in oil inventories, a 2.2-million-barrel draw in gasoline stocks and a 1.6-million-barrel increase in distillate inventories. Refinery runs were seen at 82.3% of capacity.

"Traders are going to concentrate on the crude and gasoline numbers," said Peter Donovan, vice president at Vantage Trading. "If the inventory numbers are not bullish, you could see prices sliding further." link.....