Oil prices tumbled 2 percent on Thursday, falling farther below last week's $100 peak, as concerns about a global economic slowdown raised the possibility of weakening energy demand. US crude settled down $1.96 at $93.71 a barrel by 1928 GMT, adding to a slide from its peak above $100 hit January 3. London Brent crude shed $2.15 to settle at $92.22.
Fears that the US economy could slip into a recession in the fallout of a housing slowdown and credit crunch have grown over recent weeks, and experts see the risk growing of a global economic slowdown as well. "Fears over weakening oil demand seem to be outweighing concerns over supply," MF Global analysts said in a note.
US Federal Reserve Chairman Ben Bernanke on Thursday raised expectations that Fed policy-makers would make further interest rate cuts to combat the US economic slowdown, tempering oil's losses and giving stock markets a boost. "In light of recent changes in the outlook for, and the risks to, growth, additional policy easing may be necessary," Bernanke said in prepared remarks.
Investment bank Goldman Sachs said on Wednesday it expected the world's biggest economy to tip into recession this year. Former US Treasury Secretary Larry Summers added his voice to the chorus on Thursday, saying the chance of a US recession was more than 50 percent. "I believe to an abnormal extent that the US and global economies are at an inflexion point, with higher risk of recession than ever before this century," he told an investor conference in Oslo.
Oil was also under pressure after a report by the US government Wednesday showed a rise in fuel stocks in the United States, offsetting a steep decline in crude supplies. Supplies of gasoline in the United States jumped 5.3 million barrels and distillates rose 1.5 million barrels last week, far exceeding analyst forecasts.
Analysts said the data from the US Energy Information Administration showed a build in stocks of diesel, mainly used by the US trucking and transport sector, which could be a forewarning about a slowdown of the wider economy.
"One week does not make a trend, but, if diesel demand in the US starts to weaken, that to me is a warning for the economy as well," said Mike Wittner, global head of oil research at SG.
The US EIA added that crude inventories tumbled 6.8 million barrels to the lowest level since October 2004. Low stockpiles of raw crude in the United States were a key factor behind oil's climb into the triple-digits last week. The Organisation of Petroleum Exporting Countries, which supplies more than a third of the world's oil, is keeping a close watch on the economy.
Opec President Chakib Khelil said on Thursday that he expected demand and prices to be affected if the malaise reached global proportions. "We are closely following with interest the evolution of this crisis, which could, if it comes to affect Europe and the rest of the world, bring about a decline in the development of the world economy," Khelil said.