Stock markets across the world took a battering as anxiety spread that a fiscal stimulus plan proposed by U.S. President George W. Bush last week would not be enough to prevent a recession.
U.S. crude fell by $1.65 to $88.92 by 7:55 a.m. EST in electronic trade, just off a session low of $88.67, which was the lowest level since December 11. Oil has dropped by more than 10 percent from a record high of $100.09 hit on January 3. London Brent crude was down $1.29 at $87.94.
Other commodities, such as precious metals, also plunged as fears deepened that a possible recession in the United States would have knock-on effects for other economies.
Speculators, such as hedge funds, on NYMEX are becoming nervous, according to the latest data from U.S. 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. U.S. 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 Organization of the Petroleum Exporting Countries (OPEC) has yet to respond and has said high prices are not caused by a lack of oil.