New York's main contract, light sweet crude for October delivery, plunged USD 3.95 to USD 91.76 a barrel following a fall of USD 5.47 to USD 95.71 at the New York Mercantile Exchange on Monday.
Brent North Sea crude for November delivery dropped USD 3.32 to USD 90.92.
The October contract, which expired on Monday, tumbled USD 5.20 to close at USD 92.38. Analysts from Societe Generale said "the financial sector crisis has revived fears of systemic risk and, more directly, is probably having some impact on oil and commodities trading and prices."
The collapse of Lehman Brothers and the USD 50 billion takeover by Bank of America of ailing Wall Street investment bank Merrill Lynch continue to reverberate.
John Kilduff, an analyst at MF Global, said the Lehman and Merrill cases "are deepening concerns about the global economy and its effect on energy demand."
He said there appears to be a preference for more liquid assets which represent a safe haven.
Analysts expect the US Federal Reserve to cut interest rates by at least 25 basis points when the central bank meets later on Tuesday for a routine policy meeting.
But they say that may not be enough to calm investors.
Despite the plunge in oil prices, the Asian Development Bank (ADB) warned today that it expected oil to stay at USD 100 or more a barrel on a long-term basis.
"While there will be short-term fluctuations, the unmistakable long-run trend is prolonged periods of high real oil prices and pronounced price volatility," the ADB said.
"The days of cheap oil are over."
Analysts have blamed worries over slowing global economic growth and resultant easing of energy demand for a drop in oil prices from record highs above USD 147 in July.
DDNEWS
