Oil fell to a six-week low today, dragged lower by a stock market plunge and fears a slowdown in the US could have a much wider impact than previously thought.
Speculative funds have begun to sell positions in oil markets and other commodities as they readjust portfolios, analysts said.
US crude fell to a low of $86.11 a barrel, its weakest since December 6th and by 12.43pm was trading at $87.40.
The level was down $3.17 from Friday's settlement. There was no settlement on Monday as floor-trading was closed for a US public holiday. London Brent crude fell $1.33 to $86.18 a barrel.
"There's a lot of fear out there. That could make some market participants go into cash until the situation becomes clearer," said Mike Wittner of Societe Generale.
The sell-off has taken oil prices below a range of roughly $90-$100 a barrel sustained since late October.
Stocks recovered slightly in European trade today after world stock markets yesterday suffered their deepest losses since September 11 th, 2001.
But traders were nervously awaiting the opening of US markets, which were closed on Monday.