Oil below $87 after OECD cuts growth forecasts

By early afternoon in Europe, benchmark oil for January delivery was down 73 cents to $86.45 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 56 cents to finish at $87.18 a barrel on the Nymex on Tuesday.

The Paris-based OECD said Tuesday that the combined economy of the 17 euro countries will contract by 0.4 percent this year, worse than May's 0.1 percent forecast. For 2013, it is expected to contract a further 0.1 percent.

The OECD also downgraded its forecasts for the U.S. economy. Even if the White House and Congress strike a budget deal before Jan. 1 and avoid the so-called fiscal cliff of automatic tax hikes and spending cuts, the OECD said the U.S. will grow by only 2 percent next year, down from May's forecast of 2.6 percent.

Traders said weak economic growth would likely hurt demand for energy.

Michael Hewson, senior market analyst of CMC Markets, said the OECD report refocused concerns on "the toxic effect the European crisis continues to have on global growth prospects."

Statistics from the Association of the German Petroleum Industry quoted in a report by JBC Energy in Vienna showed that German gasoline consumption in September fell around 11 percent on the year.