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Oil retreated below US$89 yesterday after making a nervous recovery as an emergency US interest rate cut halted a global financial market sell-off but failed to halt recession fears in the world's top oil consumer.
In a rare policy move, the Federal Reserve slashed interest rates by 75 basis points to 3.5 per cent on Tuesday, its biggest cut in more than 23 years and a move that some traders said smelled of panic.
US crude fell 36 cents to US$88.85 a barrel by 0555 GMT after falling as low as US$86.11 a day ago amid a global stock market rout.
London Brent crude shed 40 cents to US$88.05 a barrel, about US$1 below its close on Friday before the worst of the turmoil hit global markets.
Some analysts said traders had been selling oil and other commodities to cover margin calls in other markets.
Oil prices plunged on Monday and Tuesday, as world stock markets momentarily posted their steepest losses since September 11, 2001 amid widespread concerns that the impact from the US credit and housing crisis could trigger a recession, curbing the steady rise in oil demand that has fuelled prices for five years.
While down almost 12 per cent from their all-time peak above US$100 a barrel hit January 3, oil prices are still up more than 60 per cent from a year ago, supported by tight inventory levels, Opec output restraints and strong demand from investors.
- REUTERS
