KEY POINTS:
LONDON - Oil slid by US$2 to a six-week low below US$89 a barrel overnight as stock markets fell and concern mounted over an economic slow-down led by top consumer the United States.
Stock markets across the world took a battering as anxiety spread that a fiscal stimulus plan proposed by US President George W. Bush last week would not be enough to prevent a recession.
US crude fell by US$1.98 to US$88.59 in electronic trade, just off a session low of US$88.56, which was the lowest level since December 11.
Oil has dropped by more than 10 per cent from a record high of US$100.09 hit on Jan. 3.
Floor trading on the New York Mercantile Exchange (Nymex) is shut on Monday for the Martin Luther King Jr. holiday.
London Brent crude was down US$1.73 at US$87.50.
"The economic slowdown is dominating sentiment today," Tony Machacek at Bache Commodities said.
Milder-than-normal weather and costly fuel are denting demand for refined products such as heating oil and petrol, analysts said.
Slower consumption has led some refiners in the United States, Europe and Northeast Asia to cut back production.
"With US petrol stocks standing at fairly comfortable levels, demand growth in the US is likely to soften," Barclays Capital said in a research note.
Other commodities, such as precious metals, also dropped as fears deepened that a possible recession in the United States would have knock-on effects for other economies.
"The demand concern, i.e. US recession, will keep the market volatile in the near term," said Badung Tariono, a fund manager at ABN AMRO Energy Fund in Amsterdam.
Speculators, such as hedge funds, on Nymex are becoming nervous, according to the latest data from US regulator, the Commodity Futures Trading Commission, released on Friday.
It revealed they had reduced net long positions - or positions that anticipate a rise in prices.
Although oil prices are falling, the United States is still very anxious about their impact on its fragile economy.
US Energy Secretary Sam Bodman on Monday during talks in Abu Dhabi repeated a plea for more oil from top exporter Saudi Arabia to try to bring down prices further.
The Organisation of the Petroleum Exporting Countries (Opec) has yet to respond and has said high prices are not caused by a lack of oil.
Ahead of Opec's meeting next month, crude oil loading data from Lloyd's Marine Intelligence Unit (LMIU) showed on Monday.
Opec seaborne oil exports, excluding Angola and Ecuador, rose 438,000 barrels per day (bpd) in December from November, when the group boosted supplies.
- REUTERS
