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NEW YORK: Crude oil prices plunged on Monday amid global market jitters after Wall Street investment bank Lehman Brothers collapsed and financial developments stoked concerns about the health of the US economy.
New York's main contract, light sweet crude for October, plummeted a hefty 5.47 dollars to close at 95.71 dollars a barrel.
In London, Brent North Sea crude for October delivery tumbled 5.20 dollars to settle at 92.38 dollars a barrel.
In intra-day trade, prices had fallen as low as 94.13 dollars in New York and 91.17 dollars in London, their lowest levels since February.
Financial markets were rocked after US investment bank Lehman Brothers filed for bankruptcy on Monday after failing to find a buyer. The venerable Wall Street bank collapsed under losses related to the US sub-prime home loan crisis and housing market slump.
In another sign of the deepening housing-related credit crisis, Bank of America announced it was buying Merrill Lynch for 50 billion dollars in stock, scooping up the battered Wall Street icon.
In the insurance sector, investors fled American International Group on fears the US insurance giant could be the next domino to fall in the worst banking crisis to shake Wall Street since the Great Depression.
AIG, saddled with toxic mortgage-backed derivatives and facing the imminent threat of a ratings downgrade, has reportedly turned to the US Federal Reserve for 40 billion dollars in bridge financing, according to the New York Times.
The US Federal Reserve said it had agreed to inject 70 billion dollars into financial markets amid turmoil following the bankruptcy of Wall Street giant Lehman Brothers.
The Fed was joined by the European Central Bank and Bank of England in pumping billions of dollars into financial markets in an effort to ensure adequate liquidity.
"The filing by Lehman Brothers for bankruptcy protection when no help was forthcoming from the federal government and the takeover of Merrill Lynch by Bank of America are deepening concerns about the global economy and its effect on energy demand," said John Kilduff, analyst at MF Global.
"While the selling (on oil markets) may not necessarily be directly linked to Lehman's demise, there certainly appears to be a preference for more liquid assets, which represent a safe haven," he said.
"The storm surrounding the demise of Lehman Brothers has apparently affected the oil markets much more than Hurricane Ike," Kilduff added.
Oil prices also were undermined by news that Hurricane Ike had caused less damage than feared to US oil platforms in the Gulf of Mexico.
US officials said that Ike, which slammed into the US Gulf Coast on Saturday, had damaged about 10 oil offshore platforms in the Gulf of Mexico, an energy hub where about a quarter of US crude oil is produced.
"The initial perception is that there hasn't been much structural damage to oil and refinery infrastructure," said David Moore, a Sydney-based commodity strategist with the Commonwealth Bank of Australia.
Oil prices fell more than a third in value from their record levels of above 147 dollars in July. Investors are growing increasingly pessimistic about weakening energy demand amid signs the global economy is slowing down.
News that militants had attacked a Shell facility in Nigeria's restive southern Delta region, a day after an armed group declared an "oil war," had little immediate impact given the backdrop of bad news from other quarters, traders said.
The Movement for the Emancipation of the Niger Delta (MEND), the most prominent of the militant groups in the oil producing region, said it had destroyed Royal Dutch Shell's Alakiri flow station in the southern Rivers State. - AFP/de
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