EXCLUSIVE - U.S. recession could drag oil to $70 - Petroleum Secretary

By Santosh Menon

LONDON (Reuters) - A major recession in the United States could drag oil prices down by at least 20 percent and strong oil demand growth in China, India and the Middle East will not be able to make up the demand shortfall, Petroleum Secretary M.S. Srinivasan said on Wednesday.

"If there is a serious economic recession, prices could tumble to $70," Srinivasan told Reuters in an interview.

Srinivasan, the senior-most official in India's petroleum and natural gas ministry, said expectations in some quarters that oil demand will hold up despite a U.S. recession because of demand growth in Asia and the Middle East were far-fetched.

"A U.S. demand recession will have a huge impact on overall crude demand. Suppose U.S. demand falls by 10 percent -- any serious recession will impact demand by at least 10 percent -- it will be a huge impact on the overall crude surplus availability and the slack availability," he said.

Srinivasan said the United States consumed around 28 percent of all the oil produced in the world -- and a 10 percent fall in demand there would equal all of India's current consumption at three percent of global demand.

"Any marginal disruption there could upset the global oil market much more than any significant increase in our consumption. China is about 8 to 9 percent of global demand and both (India and China) put together, we are far less than the U.S.," he said.

Oil prices, which hovered around $87 a barrel on Wednesday after crossing $100 earlier this month, will come down by at least 20 percent in the event of a recession and may force the Organization of the Petroleum Exporting Countries to cut back production, Srinivasan said.

"Otherwise, prices could tumble more than 20 percent," he said.