NEW YORK --- Crude oil fell below $89 a barrel for the first time since February as the credit crisis deepened in Europe, Bloomberg reported today. This latest drop reflects concerns that global economic growth will slow further and reduce demand for fuels.
Oil dropped as low as $87.56 a barrel in New York. Meanwhile, European leaders pledged to bail out struggling banks and protect depositors.
OPEC President Chakib Khelil said today the price slide will continue next year. Saudi Aramco, the world's largest state oil company, trimmed its prices to Asia and the U.S, Bloomberg reported.
"The negative sentiment that's growing in Europe is definitely having an impact,'' Gene McGillian, an analyst at TFS Energy LLC in Stamford, Conn., told Bloomberg. "The dollar going up helped oil start on a down note. People are looking at how far it will drop rather than looking at a technical rebound.''
Crude oil for November delivery fell $5.73, or 6.1 percent, to $88.15 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Earlier, the price reached the lowest since Feb. 7. Futures have fallen 40 percent from the record $147.27 reached July 11.
New York oil prices declined 12 percent last week amid reports showing that U.S. fuel demand the previous four weeks was the lowest in almost seven years. Manufacturing shrank in September at the fastest rate since the last recession in 2001. The Labor Department reported a bigger-than-expected 159,000 drop in payrolls in September last week, Bloomberg reported.
"With the stream of economic distress signals continuing unabated, the oil market is betting that demand will really suffer,'' Christopher Bellew, a senior broker at Bache Commodities Ltd. in London, told Bloomberg. "A further push towards $85 is looking highly likely in these feverish conditions.''