Crude oil fell for a second day in New York, extending its biggest one-day slide in more than 18 years yesterday, as slowing economic growth reduces demand.

Oil had its largest dollar decline since Jan. 17, 1991, and the biggest percentage drop yesterday since March as Federal Reserve Chairman Ben S. Bernanke said risks to growth and inflation have risen. A U.S. envoy will attend a meeting where an Iranian negotiator will give a formal response to economic and diplomatic incentives offered for the suspension of its uranium- enrichment program, the New York Times reported.

``If a recession happens in the U.S. and if it's a bad one, it could have an impact on the whole world and that is the fear,'' said Anthony Nunan, Tokyo-based assistant general manager for risk management at Mitsubishi Corp. ``This could be a temporary blip as demand in developing economies is still strong unless we see big rise in inventories or supplies.''

Crude oil for August delivery dropped as much as $1.52, or 1.1 percent, to $137.22 a barrel in electronic trading on the New York Mercantile Exchange. It was at $138.35 a barrel at 2:30 p.m. Singapore time. Futures reached a record $147.27 a barrel on July 11 and have risen 86 percent in the past year.

Oil plunged $9.26 to $135.92 a barrel at 11 a.m. New York time yesterday, dropping from $144 in half an hour. The contract settled $6.44, or 4.4 percent, lower at $138.74 a barrel.

``When it traded below $140, a big wave of selling hit,'' said Addison Armstrong, director of market research at TFS Energy LLS in Stamford, Connecticut. ``The market was trading a little bit above $140, and when it traded below, it fell something like $2 in a minute. Nothing seemed to hold it.''

`OPEC Cautious'

The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world's oil, cut its 2008 global oil demand forecast for a sixth month, citing lower demand for transport fuel in the U.S. It also said it expects demand for its crude will fall in 2009 as the global economy slows.

``OPEC is too cautious to raise production or capacity as they feel demand may not come,'' Mitsubishi's Nunan said. ``That is why the market will stay supported.''

Demand for OPEC crude next year will average 31.2 million barrels a day, a drop of 710,000 barrels a day from the forecast for 2008, the group said in its monthly oil market report yesterday.

Brent crude oil for August settlement fell as much as $1.05, or 0.8 percent, to $137.70 a barrel on London's ICE Futures Europe exchange. It was at $138.32 a barrel at 2:21 p.m. Singapore time.

The August contract expires today. The more widely held September contract traded at $139.39, down 47 cents, at 1:51 p.m. Singapore time.

Iran Meeting

William Burns, the U.S. undersecretary of state for political affairs, will attend a July 19 meeting in Geneva arranged by the European Union with Iran's nuclear negotiator, Saeed Jalili, the New York Times said, citing a senior administration official it didn't identify.

Burns will be the highest level official to meet with an Iranian official since the Islamic Revolution of 1979, the Times said.

Reports that Israel held military exercises mimicking an attack on Iran helped push prices to a record last week.

U.S. gasoline demand fell 5.2 percent last week, the 12th consecutive weekly drop, a MasterCard Inc. report showed yesterday.

U.S. oil supplies probably fell last week as record prices discouraged buying by refiners, according to a Bloomberg News survey of analysts.

Crude supplies probably declined 2.2 million barrels in the week ended July 11 from 293.9 million the week before, according to the median of 10 responses by analysts surveyed before an Energy Department report at 10:35 a.m. Washington time today.

Gasoline stockpiles were probably unchanged from 211.8 million barrels the week before, the survey showed. Distillate fuel, including heating oil and diesel, probably rose 2 million barrels from 122.5 million barrels the week before.

U.S. oil refineries probably operated at 89.2 percent of capacity, unchanged from the week before, the survey showed.