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Oil falls below $89 on economy concerns

2008-01-21 11:02:32

Oil fell more than $1 to a one-month low below $89 a barrel on Monday, weighed down by concerns that a recession in top consumer the United States could drag down other economies and hurt oil demand.

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.

"With the current sentiment in the market, people are...saying it must be really bad if they are scrambling to come up with stimulus plans," said Mike Wittner, global head of oil research at Societe Generale.

U.S. light crude for February delivery fell $1.65 to $88.92, the lowest level since December 18, in Globex electronic trading by 1042 GMT. Floor trading on the U.S. NYMEX exchange is shut on Monday for the Martin Luther King Jr. holiday.

London Brent crude was down $1.29 to $87.94.

Mounting economic problems in the U.S. and high energy costs have prompted cuts in forecasts for oil demand growth and dragged crude prices down by 10 percent from the record of $100.09 hit on January 3.

Prices fell on Monday despite supportive factors such as the closure of Mexico's oil export terminals due to bad weather, geopolitical worries and OPEC's ambivalence in the face of calls for the group to raise oil output.

Mexico closed all its main oil exporting ports on Sunday due to bad weather, the transport ministry said on its Web site. The Gulf of Mexico ports ship around 80 percent of the country's daily oil exports.

Mexico, the world's No. 9 exporter of crude oil and a top-three supplier to the United States, has seen its exports repeatedly disrupted in recent months by rough weather that has halted shipments for days at a time.

OPEC will examine all options when its ministers meet on February 1, UAE oil minister Mohammed al-Hamli said on Monday, a day after his counterpart and Qatari Oil Minister Abdullah al-Attiyah said the oil market remained well supplied and there was no need to increase output.

The United States has been mounting pressure on the exporter group to pump more oil.