Oil today recovered from a 10-month low, but stayed negative after the US Federal Reserve led a global round of emergency interest rate cuts to try to shore up the world economy.
US light crude for November delivery was down 79 cents at $89.27 a barrel by 12.48pm. London Brent crude fell by 36 cents to $84.30.
"The oil market could take these rate cuts either way," said Helen Henton, head of commodities at Standard Chartered Bank.
"They might decide that this is a sign that things are really, really bad now and demand is going to suffer as a result, or they could see it as the strong coordinated action the market has been needing to strengthen the global economy. A lot of investors are going to wait and see."
Earlier in the session US crude had fallen by more than $4 to $86.05, its lowest level since December 6th, 2007 after British government action to prop up its banks failed to reassure financial markets and oil traders predicted oil demand would fall.
Financial markets rallied collectively after the US-led rates cuts. The US Federal Reserve said it was cutting its key rate by 50 basis points to 1.5 per cent.
Other banks cutting interest rates also included China, which reduced its key rate by 27 basis points. Surging oil demand in China and elsewhere in Asia played a large part in oil's sustained rally that culminated in a record of $147.27 in July this year.
Many analysts had predicted Chinese fuel demand would remain strong even if it plummeted in the United States, the world's biggest energy consumer, but concern has mounted that the Chinese economy will not escape global economic turmoil.
Later today, attention will turn to oil inventory data from the US government's Energy Information Agency (EIA), expected to be released at 3.35pm. An increase in inventories could put further pressure on crude prices.
Crude stocks probably rose for the second week in a row last week as imports continued to rebound after storm disruptions, a Reuters poll of 11 analysts showed.