Oil rout deepest in 16 yrs

Oil prices have fallen as much as $16 from their peaks, their steepest reversal in 16 years, in a correction that traders say may be harder to shake off than past setbacks over the market's four-year rally. Technical analysts who study past price action for future direction, say the drop through the 200-day moving average last week and this week's fall below a three-year trend line - intact since mid-2003 - both send worrying signals.

U.S. crude has dropped nearly $15 to hit a near six-month low of $63.53 a barrel on Wednesday, a fall only a hair smaller than those in August-November 2005 and October-December 2004. In those cases, oil recovered to make new highs within five and eight months, respectively.

While many analysts say the worst may not be over yet in the latest shake-out, most also agree that there remains scope for another attempt at surpassing the previous summit. "If the fall is fast enough and hard enough, then there's momentum selling on the other side - that can have a sustained influence on prices, weeks or months," says Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia. "I do think this dip could well outdo those last two falls, but I don't think it destroys the story."

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