Aug. 17 (Bloomberg) -- Crude oil fell for a fourth day, reaching a two-month low, after U.S. reports showed economic growth is slowing and gasoline demand waning with the end of the summer driving season.

Gasoline consumption dropped last week in the U.S., posting the biggest decline since April, the U.S. Energy Department said yesterday. Signs of slowing economic growth announced by the government yesterday included a plunge in housing starts to the lowest in almost two years.

``The economic growth slowdown took out some steam from the oil demand with the end of the driving season'' approaching, said Peter Luxton, a London-based energy analyst at Informa Global Markets. Stockpiles are ``very comfortable,'' he said.

Crude oil for September delivery fell as much as $1.45, or 2 percent, to $70.44 a barrel on the New York Mercantile Exchange, the lowest since June 26. The contract traded at $70.81 at 2:52 p.m. in London.

Brent crude oil for October settlement fell as much as $1.68, or 2.3 percent, to $71.40 a barrel in trading on the ICE Futures exchange, the lowest price since June 28. The contract traded at $71.92 at 2:52 p.m. in London.

Oil also fell after a cease-fire in Lebanon halted fighting between Israel and Iran-supported Hezbollah, lessening concern that Middle East supply would be disrupted. New York-traded crude has declined almost 10 percent from a record $78.40 reached July 14, two days after Hezbollah abducted two Israeli soldiers and as Israel counterattacked.

The drop has calmed concern that inflation will accelerate because of energy costs. U.S. consumer prices rose at the slowest pace in five months, the Labor Department said yesterday. Producer prices unexpectedly fell last month.

Gasoline Price, Supply

U.S. gasoline use, as measured by deliveries from refineries, dropped 1.7 percent to 9.53 million barrels a day, the lowest since mid-June, the Energy Department said yesterday. Demand the week before averaged 9.7 million barrels, the second- highest ever. Gasoline consumption peaks between Memorial Day in May and Labor Day in September as people drive on vacations.

Gasoline for September delivery fell as much as 4.81 cents, or 2.4 percent, to $1.93 a gallon in New York. It declined 0.7 percent to $1.9781 yesterday, the lowest settlement since May 17. Prices have fallen about 15 percent this month.

The average U.S. price for unleaded gasoline at the pump fell to $2.977 per gallon yesterday from $2.985 the day before, according to the American Automobile Association, the nation's largest driver organization. The pump price is 38 cents higher than a year ago.

Stockpiles

Gasoline supplies fell 2.27 million barrels to 205.4 million barrels, equal to the five-year average, the Energy Department said yesterday. U.S. crude oil stockpiles slipped 1.6 million barrels to 331 million last week, leaving them 10 percent higher than the five-year average for the period.

Oil and gasoline prices fell as reports showed global economic growth is cooling. In China, the world's second-largest oil user, fixed-asset investment slowed in July compared with the first half of the year.

Core prices in the U.S., excluding food and energy, rose 0.2 percent in July, the smallest increase since February, the Labor Department said yesterday.

Housing starts in the U.S., which consumes about a quarter of the world's oil, fell 2.5 percent to an annual rate of 1.795 million in July. Building permits dropped 6.5 percent, the most since September 1999, the Commerce Department said.

Trend Is Up

In ``October, November and December, we might see oil prices come off as global growth slows,'' said Shane Oliver, chief economist at AMP Capital Markets in Sydney. ``But in the longer-term context, the trend in oil prices will still be up, and any weakness should be seen as a buying opportunity.''

Israel transferred control of 50 percent of southern Lebanon to a United Nations force today as Lebanese soldiers entered the region three days after the cease-fire began.

The conflict left about 1,200 Lebanese dead and 4,500 wounded, Lebanese Interior Minister Ahmad Fatfat said yesterday. Israeli Prime Minister Ehud Olmert said 159 Israelis were killed.

The UN, which is trying to persuade members to join a 15,000-strong peacekeeping force, holds a first meeting in New York today, seeking pledges from countries to contribute soldiers. The UN has yet to receive any commitments, spokesman Stephane Dujarric said yesterday.

In the Gulf of Mexico, Total SA, Europe's third-biggest oil company, said it restarted Matterhorn, a platform shut by damage from Hurricane Katrina a year ago. Matterhorn produces 33,000 barrels of oil and 55 million cubic feet of gas a day.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

Last Updated: August 17, 2006 09:56 EDT