NEW YORK (AFP) — Oil prices fell Tuesday flirting with the 90-dollar mark to reach new seven-month lows amid turmoil on the financial markets which could spur lower energy demand, traders said.
New York's main contract, light sweet crude for October, plummeted 4.56 dollars to close at 91.15 dollars a barrel.
London's Brent North Sea crude for delivery in November tumbled to 89.22 dollars, a seven-month low and a fall of 3.16 dollars.
OPEC on Tuesday cut its world oil demand growth forecast for 2008 to 1.02 percent from 1.17 percent previously, in the face of falling demand already occurring in the United States, the world's biggest energy consumer.
The price of crude oil has now plunged by 10 dollars in the last two sessions to lose 38 percent since striking record highs above 147 dollars in July.
Crude oil dropped "for reasons that have very little to do with the underlying fundamentals," said Mike Fitzpatrick, from MG Global.
"Prices of assets of all classes continue to be driven down by efforts to raise cash and avoid risk."
Deepening worries about a slowdown in demand "are likely to haunt energy markets in the near term, while another collapse of a major financial institution, or even (ailing US insurer) AIG, could cause an even broader sell-off in commodities," Sucden analyst Andrey Kryuchenkov said in London.
Oil prices tumbled by more than five dollars on Monday amid global market jitters after Wall Street investment bank Lehman Brothers collapsed and financial developments stoked concerns about the health of the US economy.
In the insurance sector, investors fled American International Group (AIG) on fears the US insurance giant could be the next domino to fall, with its shares tumbling as much as 70 percent Tuesday before a modest bounceback.
"As noted yesterday, it is a combination of bad economic news (Lehman} and relatively good news in the aftermath of Ike easing prices," said James Williams an analyst with WTRG Economics.
He said that after Hurricane Ike barreled through North America over the weekend oil platforms in the Gulf of Mexico were getting up and running again.
"Ports are reopening at least for shallow draft vessels. This means that return to the platforms will be faster and with that the return of natural gas production followed by oil," said Williams.
"Two more refineries are now reporting partial operation. The main problem slowing refineries return to operation is reliable electricity and in some cases water."
Oil market traders were also keeping a watchful eye on unrest in Nigeria, which is the second biggest crude producer in Africa after Angola.
Southern Nigerian militants said Monday they had attacked a second Niger Delta oil installation in 24 hours after declaring an all-out "oil war" as part of a campaign for greater autonomy for the region.
Security has worsened markedly in oil-rich southern Nigeria since the militants emerged in early 2006, multiplying attacks, kidnappings of foreign oil workers and sabotage of both land and offshore facilities.
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