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Oil extends slump; Asia stocks at 3-wk low

HONG KONG - Oil and metals prices skidded on Tuesday toward multi-month lows, denting shares of companies in the resources sector and sending Asian stocks to their lowest in three weeks amid deepening fears of a weakening global economy.

Oil prices fell more than $1 to near Monday's three-month low below $120 a barrel in a sharp retreat from a record above $147 touched in mid-July, on signs of rising OPEC output at a time of declining world demand.

Not even a storm in the Gulf of Mexico prevented the slide in oil, which comes as a mixed blessing for Asia. Weaker oil prices provide relief for countries grappling with double digit inflation, but also confirm suspicions of slowing global demand -- a bad omen for the export-reliant region.

The dollar got a boost from cheaper oil, though caution remained ahead of the Federal Reserve's meeting later on Tuesday. The Fed is expected to leave U.S. interest rates unchanged, partly due to easing energy prices.

"At the moment, people are taking the view that the glass is half-empty, rather than half-full," said Greg Goodsell, equity strategist at ABN AMRO in Sydney. "Rather than looking at the positive side, that weaker commodities take the pressure off inflation, people are seeing it as a product of slower growth."

U.S. crude futures were down $1.13 at $120.28 at 0250 GMT, after falling on Monday to as low as $119.50, the lowest level since early May.

OPEC oil supply rose for a third consecutive month in July due to higher output from the world's top exporter Saudi Arabia and smaller increases from other members, a Reuters survey showed on Monday.

The falls in crude prices came even as Tropical Storm Edouard moved across the Gulf of Mexico, with a 1-in-5 chance of hitting the Texas coast as a hurricane, according to U.S. forecasters.Metals also slumped, with spot platinum dropping to its weakest in more than six months on fears of falling demand from struggling global auto makers. Spot prices fell as low as $1,530 compared to $1,551/$1,571 late in New York on Monday.

Gold edged down about $2 to $893.50 an ounce.

Commodity Shares Slump

The falling prices of oil and metals dented commodity shares in Asia, with Australian resource firm BHP Billiton Ltd losing almost 6 percent and Japan's oil and gas developer Inpex Holdings shedding about 4 percent

Asian stock indices overall were broadly weaker as investors fret about a slowdown in global economic growth. The MSCI index of Asian stocks outside Japan lost 1.5 percent and hit its lowest level in about three weeks.

The resource-heavy Australian index slumped 2 percent, while the Hong Kong index lost 1.8 percent and shares in Taiwan dropped 2.1 percent.

Tokyo's Nikkei average swung between gains and losses, and was last up about 0.3 percent. Falls in commodity-related shares were offset by gains in exporters such as Honda Motor that benefit from a weaker Japanese yen.

The dollar was range-bound at around 108.20 yen near a six-week high of 108.39 yen hit last week. The euro, however, dipped to about $1.5525 nearing last week's six-week low of around $1.5510.

Speculation that the Reserve Bank of Australia, which meets on Tuesday, could highlight risks to the economy and pave the way for monetary easing knocked the Australian dollar to nearly four-month lows against the U.S. dollar.

The Australian central bank's interest rate decision is due at 0430 GMT.