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Oil price falls to 7-month low amid global credit crisis

Oil tumbled more than four percent to a seven-month low on Tuesday, in free fall for a second day as Lehman Brothers' collapse made investors ditch oil for safe-haven assets, and on fears the credit crisis will hurt the real economy.

Reports that Hurricane Ike caused minor damage to U.S. oil platforms and refineries also weighed on prices, adding to the previous session's more than $5 fall and almost 37-percent decline from its peak above $147 in mid-July.
U.S. light crude for October delivery, which fell as much as $4.11 at one point, was down $3.92 at $91.79 a barrel by early Tuesday, tumbling in concert with everything from Asian stock markets to grains. The yen rallied versus the dollar on widespread risk aversion in the wake of Wall Street's turmoil.

London Brent crude fell $3.97 to $90.27 a barrel, having slumped earlier by as much as $4.44 to touch its lowest since February 8.

"Lehman Brothers' failure has magnified existing worries about the international economic outlook, adding to fears of slower demand for commodities," said David Moore, commodity strategist at Commonwealth Bank of Australia.

"Early reports suggest that Hurricane Ike ... caused only limited structural damage to oil infrastructure," he added.

On Monday, Wall Street had its worst day since markets reopened after the September 11 attacks, with investors fleeing to safer havens such as gold.

Lehman Brothers' bankruptcy, the sale of Merrill Lynch and the struggle of American International Group all stirred fears about the US financial sector's stability and the outlook for the global economy.

Following crude oil's sharp losses - down 20 percent since the start of the month - technical analysts now focused on support below $90 a barrel and into the $85 to $80 a barrel region for the next leg lower.

A big chunk of US energy production shut by Hurricane Ike could restart within a week, with the only reports of damage to refineries so far included Shell's Deer Park Plant and ConocoPhillips' Alliance refinery. (Reuters)

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