Oct. 16 (Bloomberg) -- The Dow Jones Europe Stoxx Oil & Gas Index dropped, led by Europe's two biggest oil companies, as crude prices sank to the lowest in more than a year on concern the global economy will slide into a recession.

The 40-company index fell 7 percent to 246.91. Royal Dutch Shell Plc, Europe's largest oil producer, slid 7.2 percent to 1,294 pence in London, the lowest close since the Class-A shares began trading in July 2005. Smaller rival BP Plc lost 4 percent, extending its decline since crude oil's July record to 31 percent.

Crude futures, which have followed movements in equity markets this month, fell as benchmark indexes from Tokyo to Budapest slumped more than 6 percent. Global stocks have tumbled on concern the deepening credit crisis will spur the failure of more financial companies. Efforts to calm markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York yesterday.

The MSCI World Index slid 4.8 percent to 904.98 at 4:43 p.m. in London, extending this week's decline to 9.3 percent on growing concern bailout plans in the U.S. and Europe will fail to avert a recession. Crude oil for November delivery fell $3.53, or 4.7 percent, to $71.01 a barrel at 12:12 p.m. in New York.

``Oil prices are falling on fears we will see a recession,'' Eugen Weinberg, senior commodity analyst at Commerzbank AG in Frankfurt, said by telephone today. Producers ``hang on the oil price, and that's weighing down their stocks.''

Dana, Tullow Fall

U.K. oil and gas explorer Dana Petroleum Plc dropped 12 percent, while rival Tullow Oil Plc fell 9.3 percent and Cairn Energy Plc slipped 3.4 percent in London trading. Galp Energia SGPS SA, the Portuguese oil company with operations in Brazil, plunged 8.5 percent in Lisbon, the lowest close since April 2007.

Norwegian drilling-services companies Sevan Marine ASA, Prosafe SE and Seadrill Ltd. were among the 10 worst performers in the Dow Jones Europe Stoxx 600 Index. John Wood Group Plc, the U.K.'s largest oilfield-services provider, slipped 7.3 percent.

Power generators also fell as German electricity for next- year delivery, a European benchmark, dropped to a four-month low on declining oil and coal prices.

The Dow Jones Europe Stoxx Utilities Index retreated 11.94, or 3.5 percent, to 327.60 as of 4:50 p.m. in London. E.ON AG, the largest weighted company in the group, sank 1.39 euros, or 5.1 percent, to 26.02 euros in Frankfurt.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

Last Updated: October 16, 2008 12:26 EDT