Aug. 17 (Bloomberg) -- Crude oil fell to the lowest in more than two weeks after a report last week showed an unexpected decline in consumer confidence in the U.S. economy.

The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2 in August, the lowest level since March. European and Asian stocks fell today as Japan’s economy grew less than economists estimated. Tropical Storm Claudette came ashore in Florida earlier today without affecting major U.S. oil and gas installations.

“Optimism on the economy has faded,” Sentje Diek, an energy analyst at HSH Nordbank AG, said by phone from Hamburg. “The markets reacted badly to the consumer sentiment report.”

Crude oil for September delivery fell as much as $1.82, or 2.7 percent, to $65.69 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the lowest since July 31. It was at $66.12 at 10:01 a.m. London time. The contract had plunged 4.3 percent on Aug. 14 after the U.S. consumer sentiment index fell to a five-month low.

Brent crude oil for October settlement declined as much as 2.5 percent on London’s ICE Futures Europe exchange and was down $1.31, or 1.8 percent, at $70.13 a barrel at 10:02 a.m.

“Perhaps the recession is over but given that consumer spending is responsible for more than two-thirds of the U.S. economy, the recovery is in doubt,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania.

Storm Comes Ashore

Tropical Storm Claudette, the first to make landfall in the U.S. this season, crossed the coast of Florida at about 1.10 a.m. local time bringing winds of 50 miles (85 kilometers) per hour, the National Hurricane Center said.

Claudette’s center passed over the Florida panhandle, which is east of the majority of oil and gas production platforms in the U.S. Gulf of Mexico.

“The supply risk premiums coming out of the hurricane season will be relatively mild,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. Investors are “not going to be quite as jittery given we don’t have that demand-supply tightness” of previous years, he said.

Rigs and platforms in the northern Gulf of Mexico accounted for about 23 percent of U.S. oil production last year, according to government data.

Last September, Hurricane Ike shut almost all the region’s oil output and about 20 percent of U.S. refining capacity.

Goldman Sachs Group Inc. closed its June 23 recommendation to buy 10 October oil contracts in New York for every natural gas futures sold, citing doubts over near-term U.S. economic growth prospects.

‘Uncertain Direction’

“This is likely to be a period of uncertain direction in both prices and fundamentals given activity has stopped declining but has yet to exhibit meaningful growth,” Goldman commodities analysts led by David Greely said in a report today. “This was certainly evident in Friday’s price action where the positive U.S. industrial production report was overshadowed by an unexpected decline in U.S. consumer confidence.”

Stocks in Japan fell on concern the country’s recovery won’t last after the Cabinet Office said the economy grew for the first time in five quarters. The Nikkei 225 Stock Average retreated as much as 3.1 percent on concern growth will falter once governments worldwide complete $2 trillion in stimulus spending.

To contact the reporters on this story: Rachel Graham in London rgraham13@bloomberg.netYee Kai Pin in Singapore at kyee13@bloomberg.net;

Last Updated: August 17, 2009 05:03 EDT