The Times Square news ticker flashes information about the Dow dropping below 10,000 Monday, Oct. 6, 2008 in New York. Financial markets took a bleak view of the future Monday, seeing contagion in a credit crisis that threatens to cascade through economies globally despite government efforts to provide relief. (AP Photo/Mark Lennihan)

NEW YORK – Oil prices plunged below US$90 a barrel yesterday, coming within reach of year-ago levels as a widening financial maelstrom spreads overseas and crimps global demand for energy.

A barrel of oil has not been this cheap in eight months, suggesting that the climate in which oil soared to unheard-of levels is coming to an abrupt end.

Crude's stunning fall comes just three months after prices surged closeto US$150 a barrel. Investors, it appears, have little faith that the US$700 billion United States rescue plan will provide a quick fix for the stumbling American economy.

Light, sweet crude for November delivery fell US$6.07, or 6.4 per cent, to settle at US$87.81 a barrel on the New York Mercantile Exchange. It was crude's fourth straight negative session and its lowest settlement since February 6.

Oil prices have tumbled 40 per cent since peaking at US$147.27 a barrel on July 11. A drop below US$85 a barrel – a near certainty in the current environment – would leave prices where they were in late October, wiping out all of the past year's massive gains.

World stock markets plunged yesterday amid growing investor anxiety that the United States debt crisis is enveloping Europe. Germany announced a bail-out package on Sunday totalling US$69 billion for Hypo Real Estate, the country's second-biggest commercial property lender.

Ireland, Iceland, Denmark and Greece moved quickly to guarantee bank deposits to ease consumer anxiety.

"The market is finally acknowledging that this credit crisis is a global phenomenon and that will equate to lower world oil demand in the future," said Phil Flynn, analyst at Alaron Trading Corporation in Chicago.

"People thought the crisis would be contained to the United States and we'd see oil demand in China and India continue to grow. Now that just doesn't seem possible."

The widening scope of the crisis has forced consumers and businesses everywhere to cut back on fuel consumption.

(AP)