Oil falls over 4 per cent as economic gloom darkens

London: Oil prices tumbled on Tuesday as a slide in global stock markets refocused attention on the prospect of widespread recession, which will adversely impact oil demand in many developed economies.

US light, sweet crude for December delivery fell $2.74, or 4.4 per cent, to $59.66 a barrel by 7:38 a.m. EST.

London ICE Brent crude fell $2.56, or 4.35 per cent, to $56.52.

"The oil market is coming down into line with demand expectations," said Simon Wardell, oil analyst at Global Insight in London.

"There's more downside weakness here than upside strength. We are expecting prices to go lower before they go higher with US crude hitting $50 before its reaches $65 again."

Economists are gradually readjusting their expectations for oil demand in the light of the accelerating slowdown in the United States and Europe and some say a contraction in worldwide oil demand is possible next year.

Many analysts are expecting a big drop in consumption in the developed economies next year and most suggest that a further rise in demand in developing economies just about offsets that fall in demand. But some economists are now talking about a fall in global oil demand in 2009.

"If we start seeing that, we really are dealing with a major surplus in supply and oil prices will come under heavy pressure," said Wardell.