March 17 (Bloomberg) -- Crude oil fell more than $6 a barrel, retreating from a record, as signs that the economy is in recession overcame concern of a weakening dollar.

U.S. industrial production dropped more than forecast in February as the economic slump deepened, the Federal Reserve said today. Stock markets and the dollar tumbled after the Fed cut rates. A ``buying orgy'' in commodities inflated prices and increased risks of a collapse, said Paul Touradji, founder of the $3.5 billion hedge fund Touradji Capital Management LP.

``The roiled financial markets are pushing energy prices lower as investors seek cash and pure-cash equivalents,'' said John Kilduff, senior vice president of energy at MF Global Ltd. in New York. ``The deteriorating economic outlook is outweighing otherwise supportive aspects of the further decline of the dollar.''

Crude oil for April delivery fell $6.22, or 5.6 percent, to $103.99 a barrel at 1:35 p.m. on the New York Mercantile Exchange. Futures climbed to $111.80 a barrel today, the highest since trading began in 1983. Prices rose as much as $1.59 and dropped as much as $6.34 today.

Brent crude for May settlement declined $5.09, or 4.8 percent, to $101.11 a barrel on London's ICE Futures Europe exchange. Futures reached a record $107.97 a barrel today.

``The volatility of the market today makes a good argument for cash being a nice place to keep your funds,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York.

In its first weekend emergency action in almost three decades, the Federal Reserve lowered the so-called discount rate by a quarter of a percentage point to 3.25 percent. The U.S. consumes almost 25 percent of global oil production.

`Frenzied Money Flow'

Commodities ``have all gone parabolically higher on frenzied money flow,'' New York-based Touradji, wrote March 10. ``Unless that money flow continues ad infinitum, in which case prices would go to infinity, then the fundamentals had better be improving as quickly as prices have been, otherwise there is nothing else to keep the markets at these levels.''

Hedge-fund managers and other large speculators increased net-long positions, or bets on higher prices, in the week ended March 11, the Commodity Futures Trading Commission said.

MF Global, the largest broker of exchange-traded futures and options, fell as much as 80 percent in New York trading on speculation clients are pulling money and as financial shares dropped to their lowest level in almost five years. The plunge today came after Bear Stearns Cos. agreed to be acquired by JPMorgan Chase & Co. for $2 a share.

Falling Dollar

The falling dollar boosted commodity prices until today as investors looked for an inflation hedge. The dollar sank to a record low against the euro and the Swiss franc fell to the weakest in 12 years against the yen, helping push gold and crude oil to highs.

``Almost all of the commodities are down as people re- examine just how bullish a recession will be for commodities,'' said Eric Wittenauer, an energy analyst at Wachovia Securities in St. Louis. ``History has shown that a slowing economy cuts into usage.''

Production at U.S. factories, mines and utilities fell 0.5 percent last month, the first decrease in four months, following a 0.1 percent January gain, the Federal Reserve said today. Factories are cutting back as the biggest housing slump in a generation prompts Americans to spend less on furniture, appliances and automobiles.

``Energy serves two masters and a significantly diminished economic outlook is trumping all other considerations,'' Kilduff said.

Gasoline Plummets

Gasoline for April delivery fell 14 cents, or 5.2 percent, to $2.5494 a gallon in New York. Futures touched $2.7435 on March 11, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.

Pump prices have yet to decrease as much as futures. Regular gasoline, averaged nationwide, fell 0.2 cent from a record to $3.283 a gallon yesterday, AAA, the nation's largest motorist organization, said.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: March 17, 2008 13:38 EDT